[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
AMENDING EXECUTIVE ORDER 12866: GOOD GOVERNANCE OR REGULATORY
USURPATION?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
COMMERCIAL AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 13, 2007
__________
Serial No. 110-2
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
MAXINE WATERS, California DANIEL E. LUNGREN, California
MARTIN T. MEEHAN, Massachusetts CHRIS CANNON, Utah
WILLIAM D. DELAHUNT, Massachusetts RIC KELLER, Florida
ROBERT WEXLER, Florida DARRELL ISSA, California
LINDA T. SANCHEZ, California MIKE PENCE, Indiana
STEVE COHEN, Tennessee J. RANDY FORBES, Virginia
HANK JOHNSON, Georgia STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida
BRAD SHERMAN, California TRENT FRANKS, Arizona
ANTHONY D. WEINER, New York LOUIE GOHMERT, Texas
ADAM B. SCHIFF, California JIM JORDAN, Ohio
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota
[Vacant]
Perry Apelbaum, Staff Director-Chief Counsel
Sean McLaughlin, Deputy Chief Minority Counsel/Staff Director
------
Subcommittee on Commercial and Administrative Law
LINDA T. SANCHEZ, California, Chairwoman
JOHN CONYERS, Jr., Michigan CHRIS CANNON, Utah
HANK JOHNSON, Georgia JIM JORDAN, Ohio
ZOE LOFGREN, California RIC KELLER, Florida
WILLIAM D. DELAHUNT, Massachusetts TOM FEENEY, Florida
MELVIN L. WATT, North Carolina TRENT FRANKS, Arizona
[Vacant]
Michone Johnson, Chief Counsel
Daniel Flores, Minority Counsel
C O N T E N T S
----------
FEBRUARY 13, 2007
OPENING STATEMENT
Page
The Honorable Linda T. Sanchez, a Representative in Congress from
the State of California, and Chairwoman, Subcommittee on
Commercial and Administrative Law.............................. 1
The Honorable Chris Cannon, a Representative in Congress from the
State of Utah, and Ranking Member, Subcommittee on Commercial
and Administrative Law......................................... 16
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, Chairman, Committee on the
Judiciary, and Member, Subcommittee on Commercial and
Administrative Law............................................. 18
WITNESSES
Mr. Steven D. Aitken, Acting Administrator, Office of Information
and Regulatory Affairs, Office of Management and Budget
Oral Testimony................................................. 21
Prepared Statement............................................. 23
Ms. Sally Katzen, Professor, University of Michigan Law School
Oral Testimony................................................. 49
Prepared Statement............................................. 50
Mr. Curtis W. Copeland, Ph.D., specialist in American National
Government, Congressional Research Service
Oral Testimony................................................. 56
Prepared Statement............................................. 57
Mr. Paul R. Noe, Partner, C&M Capitolink LLC, and Counsel,
Crowell & Moring Environment & Natural Resources Group
Oral Testimony................................................. 80
Prepared Statement............................................. 82
Mr. Peter L. Strauss, Professor, Columbia University School of
Law
Oral Testimony................................................. 91
Prepared Statement............................................. 92
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable Linda T. Sanchez, a
Representative in Congress from the State of California, and
Chairwoman, Subcommittee on Commercial and Administrative Law.. 2
APPENDIX
Material Submitted for the Hearing Record
Post-Hearing Questions and Responses for Steven D. Aitken, Acting
Administrator, Office of Information and Regulatory Affairs,
Office of Management and Budget................................ 108
Post-Hearing Questions and Responses for Sally Katzen, Professor,
University of Michigan Law School.............................. 125
Post-Hearing Questions and Responses for Curtis W. Copeland,
Ph.D., specialist in American National Government,
Congressional Research Service................................. 136
Post-Hearing Questions and Responses for Paul R. Noe, Partner,
C&M Capitolink LLC, and Counsel, Crowell & Moring Environment &
Natural Resources Group........................................ 138
Post-Hearing Questions and Responses for Peter L. Strauss,
Professor, Columbia University School of Law................... 304
AMENDING EXECUTIVE ORDER 12866: GOOD GOVERNANCE OR REGULATORY
USURPATION?
----------
TUESDAY, FEBRUARY 13, 2007
House of Representatives,
Subcommittee on Commercial
and Administrative Law,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:05 p.m., in
Room 2141 of the Rayburn House Office Building, the Honorable
Linda Sanchez (Chairwoman of the Subcommittee) presiding.
Ms. Sanchez. The hearing of the Subcommittee on Commercial
and Administrative Law will now come to order.
I would like to begin by welcoming everyone to the first
hearing of this Subcommittee of the 110th Congress, and in
particular I wish to extend warm regards to the Ranking Member
of the Subcommittee, Mr. Cannon. I very much look forward to
our working together. I would also like to welcome the two
newest Members to the Judiciary Committee, Mr. Johnson and Mr.
Jordan, to the Subcommittee.
At the request of a minority Member of the Science
Committee, we moved the starting time of this hearing from 1 to
2 p.m. to accommodate the Science Committee hearing that has
just concluded, and I appreciate the cooperation of our Ranking
Member and the indulgence of our witnesses and attendees.
I will now recognize myself for a short statement.
Over the last several weeks, I have been reading some very
disturbing news reports and commentaries about an Executive
Order issued last month by President Bush. The new Order
substantially amends Executive Order 12866, an Order that has
guided the OMB regulatory review process for the last 13 years.
This new Order requires agencies to identify specific ``market
failures'' or problems that warrant a new regulation.
Furthermore, agency heads are now required to designate a
presidential appointee as an ``agency policy officer'' to
control upcoming rulemaking. In a sense, the Executive Order
politicizes regulations, many of which were specifically
created by experts to protect the health and safety of our
citizens. I am concerned that the main thrust of this new Order
appears to shift control of the regulatory process from the
agencies--the entities that have the most substantive knowledge
and experience to the White House.
The primary purpose of this regulatory process is to
provide guidance and interpret technical policies, often at the
request of industry. Unfortunately, we don't know what prompted
President Bush to undertake a major overhaul of this proven
process. There is some speculation as to the Administration's
reasoning. The New York Times, for example, reported that this
new Executive Order ``strengthens the hand of the White House
in shaping rules that have, in the past, often been generated
by civil servants and scientific experts.'' Others claim that
this is just another clandestine ``power grab'' by the
Administration.
These thoughts and concerns are not just being expressed by
the so-called liberal media or partisan hacks. CRS, for
example, says that the revisions made by Executive Order 13422
``represent a clear expansion of presidential authority over
rulemaking agencies.'' CRS also notes that the Order can be
viewed as part of a broader statement of presidential authority
presented throughout the Bush administration--from declining to
provide access to Executive Branch documents and information to
creating presidential signing statements indicating that
certain statutory provisions will be interpreted consistent
with the President's view of the ``unitary executive.''
That is a rather serious observation coming from a
preeminently nonpartisan source. And the fact that
Subcommittees from both the Judiciary and Science Committees
are looking into this issue I think underscores the serious
concerns that the Order appears to present.
To help shed some light on these issues, we have with us
today a truly notable witness panel. We are pleased to have a
representative from the Administration, as well as two former
Administration officials. We also have the author of the CRS
report that I mentioned earlier, as well as one of the leading
academics on presidential review of rulemaking. Accordingly, I
very much look forward to hearing their testimony, and
appreciate their willingness to participate.
[The prepared statement of Ms. Sanchez follows:]
Prepared Statement of the Honorable Linda T. Sanchez, a Representative
in Congress from the State of California, and Chairwoman, Subcommittee
on Commercial and Administrative Law
Over the last several weeks, I've been reading some very disturbing
news reports and commentaries about an executive order issued last
month by President Bush. The new Order substantially amends Executive
Order 12866, an order that has guided the OMB regulatory review process
for the last 13 years. This new Order requires agencies to identify
specific ``market failures'' or problems that warrant a new regulation.
Furthermore, agency heads are now required to designate a presidential
appointee as an ``agency policy officer'' to control upcoming
rulemaking.
In a sense, this Executive Order politicizes regulations, many of
which were specifically created by experts to protect the health and
safety of our citizens.
I am concerned that the main thrust of this new Order appears to
shift control of the regulatory process from the agencies--the entities
that have the most substantive knowledge and experience--to the White
House.
The primary purpose of this regulatory process is to provide
guidance and interpret technical policies, often at the request of
industry.
Unfortunately, we don't know what prompted President Bush to
undertake a major overhaul of this proven process.
There is some speculation as to the Administration's reasoning. The
New York Times, for example, reported that this new Executive Order
``strengthens the hand of the White House in shaping rules that have,
in the past, often been generated by civil servants and scientific
experts.''
Others claim this is just another clandestine ``power grab'' by the
Administration.
These thoughts and concerns are not just being expressed by the so-
called liberal media or partisan hacks. CRS, for example, says the
revisions made by Executive Order 13422 ``represent a clear expansion
of presidential authority over rulemaking agencies.''
CRS also notes that the Order ``can be viewed as part of a broader
statement of presidential authority presented throughout the Bush
Administration--from declining to provide access to Executive branch
documents and information to creating presidential signing statements
indicating that certain statutory provisions will be interpreted
consistent with the President's view of the `unitary executive.' ''
That's a rather serious observation coming from a preeminently
nonpartisan source.
And the fact that subcommittees from both the Judiciary and Science
Committees are looking into this issue I think underscores the serious
concerns that the Order appears to present.
To help shed some light on these issues, we have with us today a
truly notable witness panel. We are pleased to have a representative
from the Administration as well as two former Administration officials.
We also have the author of the CRS report that I mentioned earlier as
well as one of the leading academics on Presidential review of
rulemaking.
Accordingly, I very much look forward to hearing their testimony
and appreciate their willingness to participate.
ATTACHMENT
Ms. Sanchez. At this time, I would now like to recognize my
colleague, Mr. Cannon, the distinguished Ranking Member of my
Subcommittee, for his opening remarks.
Mr. Cannon. Thank you, and welcome, Madame Chairman.
This is--let me just say briefly to begin that we had a few
problems, I think, with notice on the hearing today, and the
rule requires a week's notice for hearings. I don't mean to be
petty about this, but my understanding is that we have been
assured by the Majority in the future any significant aspects
of hearings won't be changed without the explicit sign-off of
the Subcommittee Ranking Member. I appreciate this and look
forward to working with you on this and other issues.
Welcome to the world of--through the looking glass, what do
we call this? The world of the APA, the Administrative
Procedure Act. And let me just say that the concerns you have
raised are very important, and this is the Committee where we
get to work these things through. And I would hope that we
would continue the process of looking at this. I think it is
not so much a partisan process as it is a very important
process for how we govern ourselves here in America.
Let me just say that government in the sunshine is an
improved process for the development of coordination of
potential regulations and significant guidance documents and
hands-on management of that process by accountable public
officials are the heart and soul of OMB's new amendments to
Executive Order 12866. They are to be celebrated and they are
what this hearing really should be about: good governance and
assuring that regulation is guided by officials accountable to
the people through the political process and not usurped by
unaccountable Federal agency employees.
The Executive Order amendments are about government in the
sunshine because they are part of OMB's commendable and
sustained effort to bring about government by guidance without
sufficient notice and comment by the public under control. They
are also about government in the sunshine because they are
specifically related to a noted and comment proceeding which
provides every interested party in the Nation an opportunity to
tell OMB whether they thought OMB's good guidance proposals
were good or bad ones.
The response was clear. The vast majority of comments
supported the effort. OMB's Executive Order, amendments, and
the final bulletin for agency good guidance practices that the
amendments accompanies contemporaneously formed the capstone of
that process. The importance of these developments to good
government should not be underestimated, as the D.C. circuit
trenchantly observed in 2000 when it addressed the troubled and
widespread use of government by guidance in its Appalachian
Power decision ``The phenomenon we see in this case is
familiar. Congress passes a broadly worded statute. The agency
follows with regulations containing broad language, open-ended
phrases, ambiguous standards, and the like. Then as years
passed, the agency issues circulars or guidance or memoranda
explaining, interpreting, defining, and often expanding the
commands in regulations. One guidance document may yield
another, and then another and so on. Several words in a
regulation may spawn hundreds of pages of text as the agency
offers more and more detail regarding what its regulations
demand of regulated entities. Laws made without notice and
comment, without public participation, and without publication
in the Federal Register or the Code of Federal Regulations.''
Appalachian Power Company, VEPA, et cetera.
The Executive Order amendments in OMB's Good Guidance
Bulletin are the latest positive steps toward turning that
around. What better way to begin to stem this tide than to
bring significant guidance statements under increased
management by the accountable and responsive political process,
and to assure that that same process remains engaged through
the planning and development phases of regulations and
significant guidance.
Those are the key innovations of the Executive Order
amendments and OMB should be praised for adopting them. Indeed,
that praise should be high praise.
What kind of guidance are we talking about bringing under
the Executive Orders procedures? Guidance that may reasonably
be anticipated to (1), lead to an annual effect of $100 million
or more; to create serious inconsistency or otherwise interfere
with an action taken or planned by another agency; to
materially alter the budgetary impact of entitlement grants,
user fees, or loan programs, and to raise novel, legal, or
policy issues arising out of legal mandates, the President's
priorities or the principles set forth in this Executive Order.
These are key examples. Bringing these kinds of truly
significant guidance documents under increased and standardized
review by accountable officials is a large step forward in good
governance and should not be questioned.
The only better approach would be for this Committee to
proceed with its Administrative Procedure Act review, and solve
many of these problems with clear legislation. Beyond these
major improvements, the amendments largely provide useful
refinements to a process where the procedure is already present
in Executive Order 12866, which was issued by the Clinton
administration. For example, the original Order required
agencies to identify what market failure or other problem they
are proposing to address. The amendments have only made that
requirement more specific, to make clear that the
identification must be in writing and to make clear that the
purpose of the identification is to enable assessment of
whether any new regulation is warranted. That is, no seen
change in the Order's terms, but it can be expected to help
better governance. In addition, the amendments allow more
flexibility in the timing and use of regulatory prioritization
and coordination meetings with agency heads. They also sensibly
call not just for a cost benefit analysis for each planned
regulation, but also for a cumulative cost benefit analysis of
all regulations planned for a calendar year. That is intended
to assist with the identification of priorities, clearly a
salutary step.
There have been allegations that the Executive Order
amendments somehow usurp the regulatory process, taking it out
of the hands of bureaucrats and placing it in the hands of
political officials. That is not correct. The agency's
authority to regulate is an authority delegated to the agencies
by Congress. OMB steps to assure that Congress's delegated
authority is watchfully overseen by officials that are
accountable through the political process, are consistent with
the source of the agency's authority.
It appears that this hearing is an attempt to show that the
Administration is placing politics over good policy. That is
not the case. Executive Order amendments are good policy. I
commend OMB for its efforts and I look forward to future
hearings that focus more directly on policy solutions to the
problems that concern the American people, such as updating the
Administrative Procedure Act and covering some of these issues.
I look forward to the hearing for all of the witnesses, and
again, Madame Chairman, congratulations, welcome, and I yield
back.
Ms. Sanchez. I thank the gentleman.
It is now my pleasure to recognize at this time Mr.
Conyers, the Chairman of the Judiciary Committee and a Member
of this Subcommittee, for his opening statement.
Mr. Conyers. Thank you very much. I enjoy referring to the
gentlelady from California, Linda Sanchez, as the Chair of the
Subcommittee on Commercial and Administrative Law, and my old
friend, Chris Cannon, as the Ranking Member of this very
important Committee on the occasion of your very first hearing,
and I am very proud to be here with you all.
This is an important item of the President's Executive
Order, a recent one altering the procedure for administrative
rulemaking. To me, in effect the President has created a new
obstacle to agencies doing their jobs under the law by
requiring for the first time a political appointee to approve
any, and maybe all, agency guidance.
Now, this is, from a wider view I say to the distinguished
witnesses who have been invited here, a part of this
unprecedented reach for power on the part of this White House,
an attempt to control the institutions that could challenge it:
the courts, the Congress, and the press, and maybe a move to
upset the balance of power among the three branches of
Government. In my view, the Executive Order that we are looking
at today represents yet another attempt to bring more authority
into the Executive Branch, and it deserves and warrants the
scrutiny of this Committee on behalf of the American people.
Policies and regulations that are created to protect public
health, safety, the environment, civil rights, and privacy
should be created by experts in the field and in my view, not
by political appointees. This deviation from past process only
serves to compromise the protection of the public while
enhancing presidential power.
Executive Order 13422 has a requirement that a market
failure or problem to identified to justify governmental
intervention also marks a serious increase of regulatory
control by the White House. It is often at the request of the
industry that the agencies issue best practices and policies.
To make them more complicated only seems to further interfere
with the regulatory process.
And so I am concerned that Orders like this will serve as
yet another barrier to oppose consumer protection, specifically
against exposure to harmful environmental pollutants and other
safety and health requirements. A number of companies have
already stated the regulatory rules have a significant impact
on their business practices, while numerous consumer groups
have complained about the Orders impact on public health and
safety.
And so this hearing starts this Subcommittee, its Chairman,
Ranking Member, and Members of the Subcommittee to a very
auspicious and important issue, and I congratulate you all for
being here today.
I thank you for the time.
Ms. Sanchez. I thank the gentleman for his statement, and I
would like to acknowledge that we have been joined by Mr.
Feeney and Ms. Lofgren.
In the interest of time, I would ask that other Members
submit their statements for the record by close of business
Friday. Without objection, all opening statements will be
placed in the record.
Without objection, the Chair will be authorized to declare
a recess of the hearing at any point.
We have been informed that our Administration witness, Mr.
Aitken, has a tight schedule this afternoon and may need to
leave before our hearing is concluded. We will hear from him
first and proceed with a round of questions for him before
turning to our other witnesses. Mr. Aitken is invited to stay
with us as long as he is able to do so.
Mr. Cannon. Madame Chairman, could we inquire of Mr. Aitken
what his timeframe is, because I think that his insights
through the course of the answering of other questions would be
very important.
Mr. Aitken. I do believe that when I was coming to the
hearing that I received an e-mail saying that OPM had told
Government employees to go home, so I suspect since nobody will
be back in the office when I arrive there that my schedule will
permit me to stay longer.
Mr. Conyers. You don't have to go home, do you, Mr. Aitken?
Mr. Aitken. No.
Mr. Cannon. That is our gain and your loss, I suppose.
Ms. Sanchez. Okay. That being the case, we will proceed as
we normally do under our normal hearing schedule. We will allow
all the witnesses to testify and then we will begin a round of
5-minute questions from the Members who are present.
I am now pleased and honored to introduce the witnesses for
today's hearing. Our first witness is Steven Aitken, who has
been the Acting Administrator of OMB's Office of Information
and Regulatory Affairs since 2006. Prior to that appointment,
Mr. Aitken was deputy general counsel at OMB, and before that
he was an assistant general counsel at OMB. In total, he has
worked at OMB for 17 years. Mr. Aitken also was a trial
attorney in the civil and antitrust divisions of the Department
of Justice. Mr. Aitken obtained his bachelor's degree in
government from Harvard College, and a law degree from Harvard
Law School. We appreciate your participation at today's
hearing, Mr. Aitken, and look forward to your testimony.
Our second witness is Sally Katzen. Professor Katzen is
presently an adjunct professor and public interest-public
service faculty fellow at the University of Michigan Law
School. Prior to this assignment, she has been a visiting
professor and lecturer at various other educational
institutions. Prior to joining academia, Professor Katzen
served nearly 8 years in the Clinton administration, first as
the OIRA administrator, then as deputy assistant to the
President for economic policy, and deputy director of the
National Economic Council in the White House, and finally as
the deputy director for management at OMB. Professor Katzen
graduated magna cum laude from the University of Michigan Law
School. Following graduation from law school, she clerked for
Judge J. Skelly Wright of the United States Court of Appeals
for the District of Columbia circuit. I should also note that
Professor Katzen has testified on several occasions before this
Subcommittee, and has contributed her expertise to the
Judiciary Committee's ongoing Administrative Law Project, for
which we are grateful. Welcome back, Professor Katzen.
Our third witness is Dr. Curtis Copeland, a Specialist in
American Government at CRS. Dr. Copeland's expertise,
appropriately relevant to today's hearing, is Federal
rulemaking and regulatory policy. Dr. Copeland has previously
testified before this Subcommittee, and he is one of three CRS
experts who are assisting the Subcommittee in the conduct of
its Administrative Law Project. His contributions to the
project are deeply appreciated. Prior to joining CRS, Dr.
Copeland held a variety of positions at the Government
Accountability Office over a 23-year period. He received his
Ph.D. from the University of North Texas.
Paul Noe is our next witness. Mr. Noe is a partner with C&M
Capitolink LLC and also provides legal services to clients as
counsel in Crowell & Moring's Environment and Natural Resources
Group. He works on the policy, legal, political, and technical
aspects of regulatory and legislative issues. Mr. Noe earned
his undergraduate degree from Williams College and his law
degree from Georgetown in 1990.
Our final witness is Professor Peter Strauss. Professor
Strauss is the Betts Professor of Law at Columbia University
School of Law. A renowned scholar of administrative law,
Professor Strauss has taught that subject at Columbia Law
School for the past 36 years. After obtaining his undergraduate
degree from Harvard College, Professor Strauss received his law
degree from Yale Law School. He thereafter clerked for
Associate Justice William Brennan and Chief Judge David Bazelon
of the United States Court of Appeals for the District of
Columbia. It is an honor to have you with us, Professor
Strauss.
At this point, I would like to extend to each of the
witnesses my warm regards and appreciation for your willingness
to participate at today's hearing. Without objection, your
written statements will be placed into the record. Since you
have submitted written statements that will be included in the
hearing record, I request that you all limit your oral remarks
to 5 minutes. You will note that we have a lighting system that
starts with a green light. After 4 minutes it turns to a yellow
light, and then after a minute longer it turns to a red light.
If you could please finish your testimony by the time the red
light turns on, I would appreciate that.
After the witnesses have presented their testimony, the
Subcommittee Members will be permitted to ask one round of
questions, subject to the 5-minute limit.
Mr. Aitken, you are invited to now begin your testimony.
TESTIMONY OF STEVEN D. AITKEN, ACTING ADMINISTRATOR, OFFICE OF
INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND
BUDGET
Mr. Aitken. Chairman Sanchez, Ranking Member Cannon,
Chairman Conyers, and distinguished Members of the
Subcommittee, thank you for giving me the opportunity to
testify before you today on the recently-issued Executive Order
13422.
A few weeks ago, the OMB Director issued a bulletin for
agency good guidance practices. On that same day, the President
issued Executive Order 13422, which amended Executive Order
12866. The bulletin and Executive Order share a common good
government goal: to improve the way that the Federal Government
does business by increasing the quality, accountability, and
transparency of agency guidance documents, including providing
the public an opportunity to review and comment on guidance.
OMB recognizes the enormous value of the guidance documents
that Federal agencies issue, but as Congress, the Courts, and
others have recognized, guidance documents can sometimes have
far-reaching effects, but they are not always developed,
issued, and used in a transparent and accountable manner that
includes an opportunity for the public to comment on the
guidance.
In order to improve the transparency, public participation,
and accountability of guidance documents, OMB in 2005 issued
for public comment a draft bulletin that identified good
guidance practices. These practices were based on those already
being used by the Food and Drug Administration. OMB recently
issued the final version of that bulletin.
The good government improvements that are made by the
bulletin are reinforced by the recent Executive Order which
provides for a relatively informal process whereby some, but by
no means all, of the significant guidance documents that are
developed by Federal agencies will be submitted to OMB for
interagency review.
The recent Executive Order makes several additional Good
Government improvements. There has been some confusion in the
press and elsewhere about these changes, and I would like to
address that. First, concerns have been raised about the
Order's provisions regarding regulatory policy officers. First,
these officers are not new. When President Clinton issued
Executive Order 12866 in 1993, he directed each agency head to
designate a regulatory policy officer.
Second, while the recent Executive Order specifies that
these regulatory policy officers will be presidential
appointees, the case is that for most departments and agencies,
the regulatory policy officers already are presidential
appointees, subject to Senate confirmation. In addition,
concerns have been raised that the recent Executive Order may
require each agency to establish a new regulatory policy office
that would be headed by the agency's regulatory policy officer.
This reference to an office was a typographical error. The
reference should have been to an officer. The Executive Order
will be implemented accordingly.
In addition, the recent Executive Order increases the
transparency of Executive Order 12866 regarding that Order's
discussion of market failure. Before explaining what this
amendment does do, I would like to explain first what it does
not do.
First, the concept of market failure is not new to
Executive Order 12866, but instead has been an integral part of
that Order since President Clinton issued it in 1993, when he
not once, but twice, referred in the Order to the ``failures of
private markets'' as a justification for regulatory action.
Second, the recent Executive Order does not make a market
failure the only basis on which a Federal agency can justify
regulatory action. To the contrary, the recent Order expressly
allows agencies to identify as a justification for regulatory
action any ``other significant problem it intends to address.''
That is what the Executive Order does not do.
What it does do is to include in the text of Executive
Order 12866 three classic examples of what is a market failure.
These examples are not new to the implementation of Executive
Order 12866. In fact, in 1996, the OIRA Administrator issued
best practice guidelines for agency use in implementing
Executive Order 12866. The 1996 guidelines included a separate
discussion of market failure and the 1996 guidelines discuss
the three classic examples of market failure that are
referenced in the recent Executive Order.
Some have expressed concern that the recent Order could
prevent agencies from issuing regulations to protect public
health and safety, but this is not correct. Many of the most
significant regulations that agencies issue are, in fact,
responses to market failures. For example, environmental
pollution is the classic textbook example of the market failure
of externality. In response to this type of market failure,
this Administration issued the Clean Air Interstate Rule, the
CAIR rule, which will have major environmental benefits by
reducing pollution.
Ms. Sanchez. Mr. Aitken, you hit your time, but if you
could just summarize briefly.
Mr. Aitken. Another type of market failure stems from lack
of information. In response to this kind of market failure, the
Food and Drug Administration recently issued regulations that
require packaged foods to include in their nutritional labeling
the amount of trans fats that are in the food. This addresses
another type of market failure.
This concludes my opening statement. I would welcome any
questions the Subcommittee has.
[The prepared statement of Mr. Aitken follows:]
Prepared Statement of Steven D. Aitken
Ms. Sanchez. I thank the gentleman.
Ms. Katzen, you are now up. You may proceed with your
testimony.
TESTIMONY OF SALLY KATZEN, PROFESSOR,
UNIVERSITY OF MICHIGAN LAW SCHOOL
Ms. Katzen. Thank you.
Madame Chairman, Mr. Cannon, Mr. Conyers, other
distinguished Members, I appreciate very much the opportunity
to testify today.
Mr. Conyers. Mr. Aitken, have you turned your microphone
off?
Ms. Katzen. Is my time going?
Ms. Sanchez. We will reset your time.
Ms. Katzen. As you mentioned in your introduction, I served
as the administrator of OIRA for over 5 years during the
Clinton administration, and was involved in the drafting and
implementation of Executive Order 12866. I am a strong
proponent of centralized review of agency rulemaking, and have
often spoken and written in defense and support of OIRA.
I am also a strong proponent of regulations, believing that
if properly crafted they can improve the quality of our lives,
the performance of our economy, and the Nation's well-being.
Why, then, am I so critical of this new Executive Order? I
have prepared written testimony that provides extensive
background and explanatory information, and would like to use
my 5 minutes to emphasize the most important points.
First, during the last 6 years, the Bush administration has
taken many discrete steps to tighten incrementally, but
nonetheless tighten OMB control over the agencies: the
information data quality guidelines, the peer review
guidelines, Circular A-4 for regulatory analyses, the risk
assessment bulletin, and now the bulletin on good guidance
practices. Each step, standing on its own, can be justified and
none standing on its own is really as bad as the critics of the
Administration have charged. At the same time, the cumulative
effect of all of these is overwhelming the agencies, and there
is a dramatically different dynamic between the agencies and
the White House than there was at the end of the Clinton
administration.
In Executive Order 12866, President Clinton continued the
practice of centralized review of rulemaking by OIRA, but at
the same time, he reaffirmed the primacy of the Federal
agencies which are the repositories of significant experience
and expertise, and are the entities to which Congress has
delegated the authority to issue rules with the force and
effect of law. Today, those agencies have at least one arm tied
behind their backs, two 10-pound bricks tied to their ankles,
and they are set on an obstacle course to navigate before they
can issue any regulations. Forgive me for mangling my
metaphors, but the combination of all of the multiple mandates
that OMB has imposed on the agencies makes it so much more
difficult for them to do their jobs. More mandates and no more
resources. In fact, the agencies have been straight-lined or
decreased.
Presidential oversight is one thing, but burdening the
agencies to slow them down or destroy their morale is something
else.
Now, I read Mr. Aitken's written testimony and listened to
him just now, and it is really very curious. He has not
identified any problems that they were experiencing under the
original Executive Order that needed to be fixed. Instead, he
has said, again and again, that there is nothing new in the
Executive Order, that the agencies are doing it already. What
they are doing is not significant. It is no big deal. By the
same token then, why did they do it? If it wasn't intended to
accomplish anything, why use the prestige of the President and
the status of an Executive Order for a non-event?
Let me also be clear to the extent he says that this is
just continuing the logical progression from the Clinton
administration, that simply is not true. One example is that he
cited the 1996 document that I co-authored with Joe Stiglitz
that uses the terms ``market failure'' and ``externality,'' et
cetera. But that was a document that was called ``Best
Practices,'' not guidance, not bulletin, not circular, not
Executive Order, and that is a very big difference.
Finally, if you argue that this is simply to increase
transparency and good government, then look at the way it was
done, without any consultation or explanation. Look at the
effect on the agencies, coming on the heels of all of the other
things that OMB has done. And look at the message it sends:
Regulations to protect the environment and to promote the
health and safety of the American people are disfavored--let
the market, not the Government, do it.
Now, Executive Order 12866 as originally drafted was
neutral as to process, even though President Clinton was highly
supportive of regulations as part of the solution to serious
problems plaguing our society. The Executive Order was not
skewed to achieve a pro-regulatory result. It was not a
codification of a pro-regulatory philosophy or ideology. It
was, on its face and by intent, a charter for good government
without any predetermination of outcomes.
In light of the actions taken over the last 6 years, that
is no longer the case with Executive Order 12866 as amended.
As I noted at the outset, there have been--a lot of these
steps have been taken. Each one of them has been a thumb on the
scale. I think by now we have a whole fist influencing the
outcome of regulatory decisions.
Thank you very much for holding this hearing. It is very
important, I believe, for Congress to let the Executive know
that it takes these matters seriously and is concerned about
the integrity of the Administrative process.
[The prepared statement of Ms. Katzen follows:]
Prepared Statement of Sally Katzen
Chairman Sanchez and Members of the Subcommittee. Thank you for
inviting me to testify today on a subject that is vitally important to
the American people. During the last six years, there has been a slow
but steady change in the process by which regulations are developed and
issued--specifically, in the balance of authority between the Federal
regulatory agencies and the Office of Management and Budget. With its
most recent actions, the Bush Administration has again restricted
agency discretion and made it more difficult for them to do the job
that Congress has delegated to the Federal agencies. It is therefore
important that this Subcommittee consider the reasons for these changes
and the implications of these changes for administrative law and
regulatory practice.
I served as the Administrator of the Office of Information and
Regulatory Affairs (OIRA) at the Office of Management and Budget (OMB)
for the first five years of the Clinton Administration, then as the
Deputy Assistant to the President for Economic Policy and Deputy
Director of the National Economic Council, and then as the Deputy
Director for Management of OMB. I am a proponent of centralized review
of agency rulemaking, and I was personally involved in the drafting and
implementation of Executive Order 12866. I have remained active in the
area of administrative law generally and rulemaking in particular.
Since leaving government service in January 2001, I have taught
Administrative Law and related subjects at the University of Michigan
Law School, George Mason University Law School, and the University of
Pennsylvania Law School, and I have also taught American Government
seminars to undergraduates at Smith College, Johns Hopkins University,
and the University of Michigan in Washington Program. I frequently
speak and have written articles for scholarly publications on these
issues.
On January 18, 2007, the Bush Administration released two
documents. One was expected; the other was not. I can understand why
OMB issued a ``Final Bulletin for Good Guidance Practices.'' While I
disagree with several of the choices made, I recognize that a case can
be made that there is a need for such a Bulletin. On the other hand,
there is no apparent need for Executive Order 13422, further amending
Executive Order 12866. Regrettably, none of the plausible explanations
for its issuance is at all convincing. As I will discuss below, there
are at least three aspects of the new Executive Order that warrant
attention: 1) the way it was done--without any consultation or
explanation; 2) the context in which it was done--coming on the heels
of OMB's imposing multiple mandates/requirements on the agencies when
they are developing regulations; and 3) the effect it will have and the
message it sends to the agencies--it will be even more difficult for
agencies to do their jobs because regulations are disfavored in this
Administration.
To put the most recent Executive Order in perspective, a little
history may be helpful. The first steps towards centralized review of
rulemaking were taken in the 1970's by Presidents Nixon, Ford and
Carter, each of whom had an ad hoc process for selectively reviewing
agency rulemakings: President Nixon's was called the Quality of Life
Review; President Ford's was focused on the agency's Inflationary
Impact Analysis that accompanied the proposed regulation; and President
Carter's was through the Regulatory Analysis Review Group. Those
rulemakings that were considered significant were reviewed by an inter-
agency group, which then contributed their critiques (often strongly
influenced by economists) to the rulemaking record.
In 1981, President Reagan took a significant additional step in
issuing Executive Order 12291. That Order formalized a process that
called for the review of all Executive Branch agency rulemakings--at
the initial and the final stages--under specified standards for
approval. The Office that President Reagan chose to conduct the review
was the Office of Information and Regulatory Affairs (OIRA),
established by the Congress for other purposes under the Paperwork
Reduction Act of 1980. Unless OIRA approved the draft notice of
proposed rulemaking and the draft final rule, the agency could not
issue its regulation.
Executive Order 12291 was highly controversial, provoking three
principal complaints. One was that the Executive Order was unabashedly
intended to bring about regulatory relief--not reform--relief for the
business community from the burdens of regulation. Second, the Order
placed enormous reliance on (and reflected unequivocal faith in) cost/
benefit analysis, with an emphasis on the cost side of the equation.
Third, the process was, by design, not transparent; indeed, the mantra
was ``leave no fingerprints,'' with the result that disfavored
regulations were sent to OMB and disappeared into a big black hole. The
critics of Executive Order 12291, including Members of Congress,
expressed serious and deep concerns about the Executive Order, raising
separation of powers arguments, the perceived bias against regulations,
and the lack of openness and accountability of the process.
When President Clinton took office and I was confirmed by the
Senate as the Administrator of OIRA, my first assignment was to
evaluate Executive Order 12291 in light of the 12 years of experience
under Presidents Reagan and Bush, and help draft a new Executive Order
that would preserve the strengths of the previous Executive Order but
correct the flaws that had made the process so controversial. President
Clinton would retain centralized review of Executive Branch agency
rulemakings, but the development and the tone of the Executive Order he
would sign (Executive order 12866) was to be very different.
I was told that Executive Order 12291 was drafted in the White
House (Boyden Gray and Jim Miller take credit for the document) and
presented, after President Reagan had signed it, as a fait accomplis to
the agencies. The protests from the agencies were declared moot. We
took a different route, consulting and sharing drafts with the
agencies, public interest groups, industry groups, Congressional
staffers, and State and local government representatives. When all
their comments were considered and changes made to the working draft,
we again consulted and shared our new drafts with all the groups, and
again took comments. More changes were made, and where comments were
not accepted, we explained the basis for our decisions.
The tenor of Executive Order 12866 was also quite different from
Executive Order 12291. As noted above, Executive Order 12866 retained
centralized review of rulemakings, but also reaffirmed the primacy of
the agencies to which Congress had delegated the authority to regulate.
(Preamble) Among other things, Executive Order 12866 limited OIRA
review to ``significant regulations''--those with a likely substantial
effect on the economy, on the environment, on public health or safety,
etc. or those raising novel policy issues (Section 6(b)(1))--leaving to
the agencies the responsibility for carrying out the principles of the
Executive Order on the vast majority (roughly 85%) of their
regulations.
Executive Order 12866 continued to require agencies to assess the
consequences of their proposals and to quantify and monetize both the
costs and the benefits to the extent feasible. (Section 1(a)) But it
explicitly recognized that some costs and some benefits cannot be
quantified or monetized but are ``nevertheless essential to consider.''
(Section 1(a)) I believe it was Einstein who had a sign in his office
at Princeton to the effect that ``not everything that can be counted
counts, and not everything that counts can be counted.''
While Executive Order 12292 required agencies to set their
regulatory priorities ``taking into account the conditions of the
particular industries affected by the regulations [and] the condition
of the national economy'' (Section 2 (e)), Executive Order 12866
instructed agencies to consider ``the degree and nature of the risks
posed by various substances and activities within its jurisdiction''
(Section 1(b)(4)), and it added to the list of relevant considerations
for determining if a proposed regulation qualified as ``significant''
not only an adverse effect on the economy or a sector of the economy,
but also ``productivity, competition, jobs, the environment, public
health or safety or State, local, or tribal governments or
communities.'' (Section 3(f))
There were other significant differences between Executive Order
12291 and Executive Order 12866, including those relating to the
timeliness of review and the transparency of the process, but for
present purposes, the key to the difference was that President Clinton
was focused on a process for better decision-making and hence better
decisions and not a codification of a regulatory philosophy or
ideology. Centralized review was seen as a valid exercise of
presidential authority, facilitating political accountability (the
President takes the credit and gets the blame for what his agencies
decide) and to enhance regulatory efficacy (that is, decisions that
take into account the multitude of disciplines and the multitude of
perspectives that can and should be brought to bear in solving problems
in our complex and interdependent society). But whatever one's view of
centralized review of agency rulemakings, Executive Order 12866 was--on
its face and by intent--a charter for good government, without any
predetermination of outcomes.
The neutrality of the process was essential. President Clinton
viewed regulations as perhaps the ``single most critical . . . vehicle
to achieve his domestic policy goals'' (Kagan, 114 Harv. L. Rev 2245,
2281-82 ((2001)), and he spoke often of the salutary effects of
regulations on the Nation's quality of life and how regulations were
part of the solution to perceived problems. But the Executive Order was
not skewed to achieve a pro-regulatory result. The regulations would be
debated on their merits, not preordained by the process through which
they were developed and issued.
When George W. Bush became President in January 2001, his
philosophy was decidedly anti-regulatory. I know that his advisors
considered whether to change Executive Order 12866 and they concluded
that it was not necessary to accomplish their agenda. Indeed, President
Bush's OMB Director instructed the agencies to scrupulously adhere to
the principles and procedures of Executive Order 12866 and its
implementing guidelines. (OMB M-01-23, June 19, 2001) The only changes
to the Executive Order came two years into President Bush's first term,
and the changes were limited to transferring the roles assigned to the
Vice President to the Chief of Staff or the OMB Director. (Executive
Order 13258)
Almost five years later, President Bush signed Executive Order
13422, further amending Executive Order 12866. So far as I am aware,
there was no consultation and no explanation of the problems under the
existing Executive Order that prompted these amendments, or whether the
amendments would have a salutary effect on whatever problems existed,
or whether the amendments would have unintended consequences that
should be considered. Press statements issued after the fact do not
make for good government.
Second, the new Executive Order comes in the course of a steady and
unwavering effort to consolidate authority in OMB and further restrict
agency autonomy and discretion. On February 22, 2002, OMB issued its
Information Quality Act (IQA) Guidelines. (67 Fed. Reg. 8452). The IQA
itself was three paragraphs attached to a more than 700-page Treasury
and General Government Appropriations Act for Fiscal Year 2001, with no
hearings, no floor debate and no committee reports. Its objective was
``to ensure the quality, objectivity, utility and integrity of
information disseminated to the public.'' OMB took up the assignment
with a vigor and determination that was remarkable. OMB's government-
wide guidelines created a new construct: now, there would be
``information'' and ``influential information'' and different (more
stringent standards) would apply to the higher tiers. OMB also required
the agencies to issues their own guidelines (subject to OMB approval);
establish administrative mechanisms allowing people or entities to seek
the correction of information they believe does not comply with these
guidelines; and report periodically to OMB on the number and nature of
these complaints. The U.S. Chamber of Commerce thought this ``would
have a revolutionary impact on the regulatory process''--keeping the
agencies from relying on data that industry thought was questionable.
Then came OMB's Proposed Draft Peer Review Standards for Regulatory
Science (August. 29, 2003), in which OMB attempted to establish uniform
government-wide standards for peer review of scientific information
used in the regulatory process. Peer review is generally considered the
gold standard for scientists. Yet leading scientific organizations were
highly critical of what OMB was trying to do and how it was doing it,
and they were joined by citizen advocacy groups and former government
officials. They argued that the proposed standards were unduly
prescriptive, unbalanced (in favor of industry), and introduced a new
layer of OMB review of scientific or technical studies used in
developing regulations. The reaction was so strong and so adverse that
OMB substantially revised its draft Bulletin to make it appreciably
less prescriptive and restrictive, and in fact OMB resubmitted it in
draft form for further comments before finalizing the revised Bulletin.
On March 2, 2004, OMB replaced a 1996 ``best practices'' memorandum
with Circular A-4, setting forth instructions for the Federal agencies
to follow in developing the regulatory analyses that accompany
significant draft notices of proposed rulemaking and draft final rules.
The Circular, almost 50-pages single spaced, includes a detailed
discussion of the dos and don'ts of virtually every aspect of the
documentation that is needed to justify a regulatory proposal. While
the term ``guidance'' is used, agencies that depart from the terms of
the Circular do so at their peril (or more precisely, at the peril of
their regulatory proposal).
Then came the OMB Proposed Risk Assessment Bulletin (January 9,
2006), providing technical guidance for risk assessments produced by
the Federal government. There were six standards specified for all risk
assessments and a seventh standard, consisting of five parts, for risk
assessments related to regulatory analysis. In addition, using the
terminology from the IQA Guidance, OMB laid out special standards for
``Influential Risk Assessments'' relating to reproducibility,
comparisons with other results, presentation of numerical estimates,
characterizing uncertainty, characterizing results, characterizing
variability, characterizing human health effects, discussing scientific
literature and addressing significant comments. Agency comments raised
a number of very specific problems and such general concerns as that
OMB was inappropriately intervening into the scientific underpinnings
of regulatory proposals. OMB asked the National Academies of Scientists
(NAS) to comment on the draft Bulletin. The NAS panel (on which I
served) found the Bulletin ``fundamentally flawed'' and recommended
that it be withdrawn.
Then, on January 18, 2007, OMB issued its final Bulletin on
``Agency Good Guidance Practices.'' Agencies are increasingly using
guidance documents to inform the public and to provide direction to
their staff regarding agency policy on the interpretation or
enforcement of their regulations. While guidance documents--by
definition--do not have the force and effect of law, this trend has
sparked concern by commentators, including scholars and the courts. In
response, the Bulletin sets forth the policies and procedures agencies
must follow for the ``development, issuance, and use'' of such
documents. It calls for internal agency review and increased public
participation--all to the good. In addition, however, the Bulletin also
imposes specified ``standard elements'' for significant guidance
documents; provides instructions as to the organization of agency
websites containing significant guidance documents; requires agencies
to develop procedures (and designate an agency official/office) so that
the public can complain about significant guidance documents and seek
their modification or rescission; and extends OIRA review to include
significant guidance documents. I do not believe it is an overstatement
to say that the effect of the Bulletin is to convert significant
guidance documents into legislative rules, subject to all the
requirements of Section 553 of the Administrative Procedure Act, even
though the terms of that Section explicitly exempt guidance documents
from its scope. To the extent that the Bulletin makes the issuance of
guidance documents much more burdensome and time consuming for the
agencies, it will undoubtedly result in a decrease of their use. That
may well have unintended unfortunate consequences, because regulated
entities often ask for and appreciate receiving clarification of their
responsibilities under the law, as well as protection from haphazard
enforcement of the law, by agency staff.
This is quite a record. While each step can be justified as helping
to produce better regulatory decisions, the cumulative effect is
overwhelming. Requirements are piled on requirements, which are piled
on requirements that the agencies must satisfy before they can issue
regulations (and now, significant guidance documents) that Congress
authorized (indeed, often instructed) them to issue. And OMB has not
requested, nor has the Congress in recent years appropriated,
additional resources for the agencies to carry out OMB's ever
increasing demands. As agencies must do more with less, the result is
that fewer regulations can be issued--which is exactly what the
business community has been calling on this Administration to do.
It is in this context that Executive Order 13422, further amending
Executive Order 12866, is released. Until the Bulletin on guidance
documents, OIRA extended its influence throughout the Executive Branch
without any amendments to Executive Order 12866. As discussed above,
OMB issued Circulars and Bulletins covering a wide variety of subjects,
virtually all of which were quite prescriptive (and often quite
burdensome) in nature. OMB Circulars and Bulletins do not have the same
status as an Executive Order, but they are treated as if they did by
the Federal agencies. Why then did OMB draft and the President sign
Executive Order 13422?
One indication of a possible answer is that while Executive Order
13422 in effect codifies the Bulletin on guidance documents, it does
not pick up and codify the earlier pronouncements on data quality, peer
review, regulatory impact analyses, or even risk assessment principles.
It may be that it was thought necessary to amend Executive Order 12866
for guidance documents because Executive Order 12866 was written to
apply only where the agencies undertook regulatory actions that had the
force and effect of law. But it is unlikely that the agencies would
balk at submitting significant guidance documents to OIRA if there were
an OMB Bulletin instructing them to do so, and since neither Executive
Orders nor Circulars or Bulletins are judicially reviewable, it is also
unlikely that anyone could successfully challenge in court an agency's
decision to submit a significant guidance document to OIRA.
Perhaps more revealing of the reason(s) for Executive Order 13422
is that it is not limited to guidance documents. Consider the other
amendments included in the new Executive Order. First, Executive Order
12866 had established as the first principle of regulation that:
Each agency shall identify the problem that it intends to
address (including, where applicable, the failure of private
markets or public institutions that warrant new agency action)
as well as assess the significance of that problem''
Executive Order 13422 amends Executive Order 12866 to state instead:
Each agency shall identify in writing the specific market
failure (such as externalities, market power, lack of
information) or other specific problem that it intends to
address (including, where applicable, the failures of public
institutions) that warrant new agency action, as well as assess
the significance of that problem, to enable assessment of
whether any new regulation is warranted.
By giving special emphasis to market failures as the source of a
problem warranting a new regulation, the Administration is saying that
not all problems are equally deserving of attention; those caused by
market failures are in a favored class and possibly the only class
warranting new regulations. This could be read as a throw back to the
``market-can-cure-almost-anything'' approach, which is the litany of
opponents of regulation; in fact, history has proven them wrong--there
are many areas of our society where there are serious social or
economic problems--e.g., civil rights--that are not caused by market
failures and that can be ameliorated by regulation.
Second, the new Executive Order amends Section 4 of Executive Order
12866, which relates to the regulatory planning process and
specifically references the Unified Regulatory Agenda prepared annually
to inform the public about the various proposals under consideration at
the agencies. The original Executive Order instructed each agency to
also prepare a Regulatory Plan that identifies the most important
regulatory actions that the agency reasonably expects to issue in
proposed or final form in that fiscal year. Section 4, unlike the rest
of the Executive Order, applies not only to Executive Branch agencies,
but also to independent regulatory commissions, such as the Securities
and Exchange Commission, the Federal Communications Commission, the
Federal Trade Commission, and the Federal Reserve Board. It is not
without significance that the new Executive Order uses Section 4 to
impose an additional restraint on the agencies:
Unless specifically authorized by the head of the agency, no
rulemaking shall commence nor be included on the Plan without
the approval of the agency's Regulatory Policy Office . . .
This language should be read in conjunction with an amendment to
Section 6(a)(2) that specifies that the agency's Regulatory Policy
Officer must be ``one of the agency's Presidential Appointees.''
Executive Order 12866 had provided that the agency head was to
designate the agency's Regulatory Policy Officer, with the only
condition that the designee was to report to the agency head. The
original Executive Order further provided that the Regulatory Policy
Officer was to ``be involved at every stage of the regulatory process .
. .''--in other words, a hands-on job. Now, there is an explicit
politicalization of the process; a ``sign-off,'' not a hands-on,
assignment; and, most significantly, no accountability. The newly
appointed officer is not required to be subject to Senate confirmation,
nor is the person required to report to a Senate-confirmed appointee.
The other changes to Section 4 are also troubling. As amended, the
agencies must now include with the Regulatory Plan the:
agency's best estimate of the combined aggregate costs and
benefits of all its regulations planned for that calendar year
. . .
Very few would dispute that the Regulatory Plan has been notoriously
unreliable as an indicator of what an agency is likely to accomplish in
any given time frame; it is not unusual for regulations that are not
included in the Plan to be issued should circumstances warrant, nor is
it unusual for regulations included in the Plan with specific dates for
various milestones to languish year after year without getting any
closer to final form.
In any event, the requirement to aggregate the costs and benefits
of all the regulations included in the Plan for that year is very
curious. We know that costs and benefits can be estimated (at least
within a range) at the notice stage because the agency will have
settled on one or more options for its proposal. But to try to estimate
either costs or benefits at the notice of inquiry stage or before the
agency has made even tentative decisions is like trying to price a new
house before there is even an option on the land and before there are
any architect's plans. The numbers may be interesting, but hardly
realistic, and to aggregate such numbers would likely do little to
inform the public but could do much to inflame the opponents of
regulation. This would not be the first time that large numbers that
have virtually no relation to reality have driven the debate on
regulation--e.g., the $1.1 trillion estimate of the annual costs of
regulations that is frequently cited by opponents of regulation, even
though every objective critique of the study that produced that number
concludes that it not only overstates, but in fact grossly distorts,
the truth about the costs of regulation. The only other plausible
explanation for this amendment to the Executive Order it that it is the
first step toward implementing a regulatory budget. In my view, the
concept of a regulatory budget is deeply flawed, but it should be
debated on the merits and not come in through the back door of an
Executive Order designed for other purposes.
There is also a gratuitous poke at the agencies in the amendment to
Section 4(C). The original Executive Order instructed the agencies to
provide a ``summary of the legal basis'' for each action in the
Regulatory Plan, ``including whether any aspect of the action is
required by statute or court order.'' The new amendment adds to the
previous language the clause, ``and specific citation to such statute,
order or other legal authority.'' It may appear to be trivial to add
this requirement, but by the same token, why is it necessary to impose
such a requirement?
As noted above, I am not aware of any consultation about either the
merits of any of the amendments or the perception that may attach to
the cumulative effect of those amendments. Therefore, I do not know
whether the agencies have, for example, been proposing regulations
based on problems caused by something other than market failure which
OMB does not consider an appropriate basis for a regulation; whether
senior civil servants at the agencies have been sending proposed
regulations to OMB that run contrary to the wishes of the political
appointees at those agencies; or whether agencies have been
misrepresenting what applicable statutes or court orders require.
If not, then there is little, if any, need for these amendments,
other than to send a signal that the bar to issuing regulations is
being raised; that OMB is deciding the rules of the road; and that
those rules are cast so as to increase the I's that must be dotted and
the T's that must be crossed. In other words, the message is that
agencies should not be doing the job that Congress has delegated to
them. This is not a neutral process. If the Bush Administration does
not like some or all agency proposed regulations, they can debate them
on the merits. But the Executive Order should not become a codification
of an anti-regulatory manifesto. This is not good government.
Ms. Sanchez. Thank you for your testimony, Professor
Katzen.
Now we move to Dr. Copeland.
TESTIMONY OF CURTIS W. COPELAND, Ph.D., SPECIALIST IN AMERICAN
NATIONAL GOVERNMENT, CONGRESSIONAL RESEARCH SERVICE
Mr. Copeland. Thank you very much.
Madame Chairman, Members of the Subcommittee, I am pleased
to be here today to discuss the changes made by Executive Order
13422. These changes are the most significant to the regulatory
review process since 1993, and as you mentioned, can be viewed
as part of a broader assertion of presidential authority
throughout the Bush administration.
The most consistent attribute of these changes is their
lack of clarity. Specifically, it is unclear why the changes
were made, their effect on agencies and the public, and their
effect on the balance of power between the President and
Congress. My bottom line is that because of this lack of
clarity, the ultimate effects of these changes are likely to
become apparent only through their implementation.
Ironically, although the Executive Order now requires
agencies to identify the specific market failure or problem
that prompted the issuance of the rules, the Bush
administration has not indicated why the changes made by the
Order are needed. For example, why did the President conclude
that agencies regulatory policy officers now must be
presidential appointees? Why do those policy officers no longer
report to the agency head, and why was their authority to
control agency's regulatory planning and rulemaking activity
significantly enhanced? Sound public policy reasons can be
envisioned for many of these changes, and enunciation of those
reasons might have prevented much of the ensuing controversy.
In some cases, the lack of clarity about the effects of the
Executive Order is because of the broad discretion that is
provided to both the agencies and OMB. For example, agencies
are now required to estimate the aggregate cost and benefits of
upcoming rules ``to the extent possible'' and are required to
identify specific market failure or problem before issuing a
rule where applicable, but it is unclear who decides what is
possible or applicable. Is it the agencies or OMB?
In other cases, the effects of the changes are unclear
because, at least on the surface, they don't appear to change
existing practices. For example, as Mr. Aitken just mentioned,
regulatory officers are already presidential appointees in most
agencies--most major agencies. Therefore, the Order seems to
require what is already being done. However, if OMB or the
President requires agencies to designate different presidential
appointees to this position, then this mandate could become
much more significant, particularly when coupled with the newly
enhanced authority of those officers to control agencies'
regulatory planning and output.
Similarly, one might think that agencies could satisfy the
requirement that they estimate the aggregate cost and benefits
of their plan rules simply by adding up the rules individual
estimates; however, agencies' regulatory plans rarely contain
quantitative estimates of cost and benefit, in many cases
because the rules are still under development and a year away
from publication. Therefore, if agencies are held strictly to
this requirement, developing aggregate cost and benefit
estimates could be proved difficult for the agencies and of
questionable validity.
Other requirements in the Order seem to have broad or
unclear scope. For example, it requires agencies to notify OMB
about significant guidance documents, and defines a guidance
document in such a way that it may cover even oral statements
by agency staff. Also, as many others have pointed out, it is
not clear how a non-binding guidance document can be expected
to have the kinds of significant effects described in the
Order; that is, $100 million impact on the economy. As a
result, agencies may conclude that none of their guidance
documents meet the Executive Order's requirements for OMB
notification. On the other hand, because OMB is also given the
authority to determine which documents are significant, the
scope and impact of this requirement may be as broad as OMB
determines it needs to be.
It is also unclear whether the time limits and transparency
requirements applicable to rules will apply to guidance
documents. For example, will OMB have to complete its review of
guidance documents within 90 days? Will agencies have to
disclose the changes made to their guidance documents at the
suggestion and recommendation of OMB?
Finally, it is unclear what impact the changes brought
about by the Executive Order will have on the balance of power
between the President and Congress. As I mentioned earlier, the
Order requires agency regulatory policy officers to be
presidential appointees, but does not indicate whether they
should be subject to Senate confirmation. One could argue that
it is the role of Congress to prescribe in law whether the
regulatory policy officer position should be subject to Senate
confirmation. Even if an agency had designated a person in a
Senate-confirmed position as an agency's regulatory policy
officer, one could argue that this person would have to undergo
another confirmation process because the scope of the person's
responsibilities had changed significantly.
Also, it is not clear whether the Orders and requirements
regarding policy officers now applies to independent regulatory
agencies that had previously been exempt from this requirement,
and that Congress establish more--and that Congress establishd
to be more removed from presidential influence. If so, this
would represent a clear departure from previous practice.
That concludes my prepared statement. I would be happy to
answer any questions.
[The prepared statement of Dr. Copeland follows:]
Prepared Statement of Curtis W. Copeland
Madam Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the changes made to the
Office of Management and Budget's (OMB) regulatory review process as a
result of Executive Order 13422, issued by President George W. Bush on
January 18, 2007.\1\ The executive order amended the review process
that was established by Executive Order 12866 and is implemented by
OMB's Office of Information and Regulatory Affairs (OIRA).\2\ The
changes are the most significant changes to that process since it was
established in 1993. The changes are also controversial, with some
characterizing the new executive order as a ``power grab'' by the White
House that undermines public protections and lessens congressional
authority,\3\ and others describing it as ``a paragon of common sense
and good government.'' \4\ However, both supporters and critics of the
new order agree that it represents an expansion of presidential
authority over rulemaking agencies. In that regard, Executive Order
13422 can be viewed as part of a broader statement of presidential
authority that has been presented throughout the Bush Administration.
---------------------------------------------------------------------------
\1\ Executive Order 13422, ``Further Amendment to Executive Order
12866 on Regulatory Planning and Review,'' 72 Federal Register 2763,
Jan. 23, 2007. Five years earlier, E.O. 13258 reassigned certain
responsibilities from the Vice President to the President's chief of
staff, but otherwise did not change the OIRA review process. See
Executive Order 13258, ``Amending Executive Order 12866 on Regulatory
Planning and Review,'' 67 Federal Register 9385, Feb. 28, 2002.
\2\ Executive Order 12866, ``Regulatory Planning and Review,'' 58
Federal Register 51735, Oct. 4, 1993.
\3\ Public Citizen, ``New Executive Order Is Latest White House
Power Grab,'' available at [http://www.citizen.org/pressroom/
release.cfm?ID=2361].
\4\ Attributed to William Kovacs, Vice President of Environment,
Energy, and Regulatory Affairs, U.S. Chamber of Commerce, in John
Sullivan, ``White House Sets Out New Requirements for Agencies
Developing Rules, Guidance,'' Daily Report for Executives, Jan. 19,
2007, p. A-31.
---------------------------------------------------------------------------
The most important changes made by the executive order appear to
fall into five general categories: (1) a requirement that covered
agencies identify in writing the specific ``market failure'' or
``problem'' that warrants the issuance of a new regulation, (2) a
requirement that each agency head designate a presidential appointee
within the agency as a ``regulatory policy officer'' who can largely
control upcoming rulemaking activity in that agency, (3) a requirement
that agencies provide their best estimates of the aggregate regulatory
costs and benefits of rules they expect to publish in the coming year,
(4) an expansion of OIRA review to include agencies' significant
guidance documents, and (5) a provision permitting agencies to consider
whether to use more formal rulemaking procedures in certain cases.
I have provided the Subcommittee with copies of a recent CRS report
that describes each of these changes in some detail and notes what
observers in the public, private, and nonprofit sectors have said about
them.\5\ Rather than reiterate what is in that report, my testimony
today focuses on what is unknown or unclear about changes brought about
by Executive Order 13422--specifically, (1) why the changes were made,
(2) the effect of the changes on federal rulemaking agencies and the
public, and (3) the effect of the changes on the balance of power
between the President and Congress with regard to regulatory agencies.
OMB recently indicated that it planned to issue clarifying
``implementation assistance'' to the agencies, which may answer many,
if not all, of these questions.\6\
---------------------------------------------------------------------------
\5\ CRS Report RL33862, Changes to the OMB Regulatory Review
Process by Executive Order 13422, by Curtis W. Copeland.
\6\ Personal conversation with OMB staff, Feb. 8, 2007.
---------------------------------------------------------------------------
why the changes were made
Executive Order 13422 does not indicate, and the Bush
Administration has not explained (except in very general terms), why
changes to Executive Order 12866 were needed at this time. For example,
it is not clear why the President believed that federal agencies'
regulatory policy officers should be required to be presidential
appointees, why those policy officers should no longer report to the
agency head,\7\ or why their authority to control their agencies'
regulatory planning and rulemaking activities should be significantly
enhanced.\8\ Likewise, the Administration has not explained why the new
executive order requires agencies to provide aggregate estimates of
regulatory costs and benefits for all of the agencies' upcoming
regulations. The rationale behind the expansion of OIRA's regulatory
review to include agencies' significant guidance documents can be
inferred, at least to some extent, by reading OMB's ``Final Bulletin
for Agency Good Guidance Practices'' that was issued the same day as
the executive order.\9\ Nevertheless, it is not clear why the
Administration believed that both the OMB bulletin and the changes to
the executive order were necessary.
---------------------------------------------------------------------------
\7\ As originally written, Executive Order 12866 required the
regulatory policy officers to report to the agency heads; Executive
Order 13422 eliminated that language when it required that the officers
be presidential appointees.
\8\ Unless specifically authorized by the agency head, the
presidential policy officer must approve the listing of all significant
forthcoming regulatory actions in the regulatory plan and approve the
initiation of all rulemaking actions. Previously, only the agency head
could approve the regulatory plan, and there was no language in the
order prohibiting rulemaking in the absence of the regulatory policy
officer's approval.
\9\ Office of Management and Budget, ``Final Bulletin for Agency
Good Guidance Practices,'' 72 Federal Register 3432, Jan. 25, 2007. To
view a copy of this bulletin, see [http://www.whitehouse.gov/omb/
memoranda/fy2007/m07-07.pdf].
---------------------------------------------------------------------------
Neither the President nor OMB is required to explain why executive
orders are issued, or why existing OIRA review processes are changed.
And sound public policy rationales can be envisioned concerning why the
changes were made. Nevertheless, it is notable that, while OMB has
required agencies to provide the ``specific market failure'' or the
``specific problem'' that led to the development of draft regulations,
the Administration has not provided similarly specific reasons why
these five changes to the review process for all significant rules and
guidance documents were made. Providing those rationales might have
gone a long way toward quieting some of the concerns that have been
voiced regarding the changes.
effect of the changes on agencies and the public
Also unclear is the ultimate effect of the changes brought about by
Executive Order 13422 in terms of the burden that they may impose on
federal rulemaking agencies, the rules that emerge from the rulemaking
process, and the transparency of that process to the public. In some
cases, this lack of clarity is because of the discretion given to
agencies or OIRA in the review process. For example, the requirement in
the new executive order that agencies estimate the aggregate costs and
benefits of upcoming rules listed in their regulatory plans is required
``to the extent possible.'' It is not clear whether agencies or OIRA
will ultimately determine what is ``possible.''
Similarly, the requirement in the ``Principles of Regulation''
section of the new executive order that each covered agency identify in
writing the ``specific market failure'' or the ``specific problem''
that it intends to address through a draft regulation is preceded by
language indicating that this principle should be followed ``to the
extent permitted by law and where applicable.'' It is unclear whether
OIRA will permit agencies to decide when the requirement is
``applicable,'' or whether OIRA will make that determination for them.
Also unclear is how strictly OIRA will enforce this principle. For
example, will OIRA consider a statutory requirement that an agency
develop a final rule by a particular date a ``specific problem'' that
permits rulemaking to go forward? Finally, although the new executive
order requires agencies to make this ``market failure'' or ``problem''
determination in writing, it does not indicate whether this written
determination should be made public. Conceivably, therefore, agencies
could satisfy this requirement by preparing a written determination of
the need for a rule without showing it to anyone outside government.
In other cases, the effect of the changes made by Executive Order
13422 are unclear because they do not appear (at least on the surface)
to change existing practices. For example, although Executive Order
12866 previously required agency heads to designate regulatory policy
officers who reported to them, the new executive order requires each
agency head to designate one of the agency's presidential appointees to
that position--a requirement that has stirred considerable
controversy.\10\ However, available evidence indicates that most agency
regulatory policy officers are already presidential appointees (e.g.,
agency general counsels), so it appears that the order simply requires
what most agencies are already doing. Likewise, the new executive order
states that ``each agency may also consider whether to utilize formal
rulemaking procedures under 5 U.S.C. 556 and 557 for the resolution of
complex determinations.'' However, agencies have always been able to
use formal rulemaking procedures, although they almost always elect not
to do so because those formal, trial-like processes are generally
considered more time-consuming, cumbersome, and expensive than informal
``notice and comment'' rulemaking. Therefore, the new order seems to
provide discretion where discretion is already allowed (but generally
not used).
---------------------------------------------------------------------------
\10\ For example, see David McNaughton, ``Reverse Regulation: With
Another Nonsense Order, President Bush Quashes Legitimate Rule-making
by Inserting Political Overseer,'' Atlanta Journal-Constitution, Feb.
2, 2007, p. A10, which cited Emory University Law Professor William
Buzbee as saying that this provision ``makes it even more likely that
regulatory decisions will be made by someone more sympathetic to
political pressure and ideology than to the federal agency's legal
duty.'' On the other hand, see Jim Wooten, ``Vouchers, Transit Alert,
Sen. Obama,'' Atlanta Journal-Constitution, Feb. 2, 2007, p. A11, which
approved of this provision and said ``There's nothing radical about
applying cost-benefit analysis to proposed laws and regulations.''
---------------------------------------------------------------------------
These provisions, however, may be more substantive than they
initially appear. For example, the new executive order says agencies
may consider whether to use formal rulemaking procedures ``in
consultation with OIRA.'' If OIRA is able to persuade agencies during
those consultations to use formal procedures more frequently, then the
impact of this provision on the agencies may, in fact, be considerable.
Also, use of formal rulemaking procedures would not permit the same
type of public participation that are the hallmark of informal ``notice
and comment'' rulemaking. By the same measure, if OIRA or the President
requires agencies to designate new or different presidential appointees
within the agencies as regulatory policy officers, then this
provision--particularly when coupled with the newly enhanced authority
of regulatory policy officers to control regulatory output--could
become much more important.
The potential effects of other requirements in the new executive
order are unclear because of the way existing procedures operate. For
example, as originally issued in 1993, Executive Order 12866 required
covered agencies, as part of the regulatory planning process, to
provide preliminary estimates of the anticipated costs and benefits of
each planned significant regulatory action. The new executive order
adds the requirement that each agency provide its best estimate of the
``combined aggregate costs and benefits of all its regulations planned
for that calendar year.'' At first impression, an agency could satisfy
this requirement by simply tallying up the estimates for each
forthcoming rule listed in the agency's plan. However, agencies'
regulatory plans rarely contain quantitative estimates for forthcoming
rules (especially for forthcoming proposed rules that may not be issued
for as much as a year), instead either narratively describing in
general terms the expected results of the regulatory action or simply
indicating that such estimates are ``to be determined.'' Also,
agencies' regulatory plans are supposed to reflect rules that are
expected to be issued during the upcoming fiscal year, so the
requirement that agencies develop estimates of aggregate costs and
benefits on a calendar year basis seems inconsistent with existing
practices.
Other requirements in Executive Order 13422 seem to have an
indefinite scope, making their effect on agencies and the benefits they
may provide to the public difficult to determine. For example, the new
order requires agencies to provide OIRA with ``advance notification of
any significant guidance documents.'' The order (particularly when
amplified by the OMB final bulletin on good guidance practices) defines
a ``guidance document'' in such a way that it covers not only written
material, but also video tapes, web-based software, and even oral
statements by agency staff if they are of ``general applicability and
future effect.'' The order defines a ``significant'' guidance document
as one that, among other things, ``may reasonably be anticipated'' to,
among other things, ``lead to an annual effect of $100 million or
more'' or ``materially alter the budgetary impact'' of entitlements,
grants, loans, and user fees. However, by definition, guidance
documents cannot have a binding effect on the public (if they did, they
would have to be rules subject to ``notice and comment'' and other
requirements), so it is not clear how guidance can be expected to have
the effects delineated in the definition. As a result, agencies may
conclude that none of their guidance documents meet the executive
order's requirements for OIRA notification. On the other hand, because
OIRA is given the authority to determine which documents are
``significant,'' the scope and impact of this requirement may be as
broad as OIRA determines that it needs to be.
Supporters of the expansion of presidential review to significant
guidance documents have said the change will standardize and make more
transparent the process by which federal agencies develop, issue, and
use guidance documents.\11\ Executive Order 12866 contains provisions
that provide a measure of transparency to the rulemaking process,
requiring (among other things) that agencies disclose to the public the
changes made to their rules at the suggestion or recommendation of
OIRA, and that OIRA disclose the rules that are under review at OIRA.
The executive order also requires that OIRA complete its reviews of
draft rules within 90 days. However, it is unclear whether these
transparency and time-limit provisions will apply to agency guidance
documents, because Executive Order 13422 did not change those sections
of Executive Order 12866. If these provisions do not apply, then
agencies may submit guidance to OIRA for review and the public may
never know that OIRA is reviewing them, for how long, or what changes
were made at OIRA's direction. If the provisions are deemed applicable
to guidance documents, then the goals of improved transparency and
standardization would appear to be supported.
---------------------------------------------------------------------------
\11\ John Sullivan, ``White House Sets Out New Requirements for
Agencies Developing Rules, Guidance,'' citing Paul Noe, partner at C&M
Capitolink, who was a counselor to former OIRA Administrator John
Graham.
---------------------------------------------------------------------------
effect on balance of power
Finally, in a larger, constitutional sense, it is unclear what
impact the changes brought about by Executive Order 13422 will have on
the balance of power between the President and Congress in this area.
Congress has a vested interest in the regulations that emerge from the
rulemaking process. Congress created each regulatory agency and enacted
the legislation underpinning each proposed and final rule. Congress may
also establish the criteria under which federal agencies can issue
rules. For example, some statutes direct agencies to establish
regulations based solely on what is required to protect human health,
and may require agencies to regulate with a margin of safety.\12\
Therefore, presidentially initiated changes that may affect these
congressional directives, such as the requirement that each agency
identify a specific ``market failure'' or ``problem'' before issuing a
rule, are naturally of potential interest to Congress.
---------------------------------------------------------------------------
\12\ For example, Section 109(b)(1) of the Clean Air Act (42 U.S.C.
Sec. 7409(b)(1)) instructs the Environmental Protection Agency to set
primary ambient air quality standards ``the attainment and maintenance
of which . . . are requisite to protect the public health'' with ``an
adequate margin of safety.''
---------------------------------------------------------------------------
Another area of potential congressional interest involves the
requirement that agency regulatory policy officers be presidential
appointees. Executive Order 13422 does not indicate whether these
appointees should be subject to Senate confirmation. Senate
confirmation of presidential appointees is generally considered a way
to strengthen congressional influence over agency decision making,
because (among other things) nominees often agree during the
confirmation process to appear subsequently before relevant
congressional committees. The most recent ``Plum Book'' indicates that
virtually all presidential appointees in regulatory agencies are
subject to Senate confirmation.\13\ In some agencies (such as the
Environmental Protection Agency, the Department of Transportation, and
the Department of Labor), all presidential appointee positions are
Senate confirmed (unless one counts noncareer senior executives, who
are appointed by agency heads subject to White House approval).
Therefore, it appears that most officials designated as regulatory
policy officers will be (or will already have been) subject to Senate
confirmation.
---------------------------------------------------------------------------
\13\ U.S. Congress, House Committee on Government Reform, United
States Government Policy and Supporting Positions, Nov. 22, 2004. For
example, the Department of Transportation had 32 positions subject to
presidential appointment with Senate confirmation (PAS positions) in
2004, but none without Senate confirmation (PA positions). The
Environmental Protection Agency had 14 PAS positions, but no PA
positions; the Department of Labor had 19 PAS positions, but no PA
positions. On the other hand, the Department of Homeland Security had
18 PAS positions, but also had six PA positions.
---------------------------------------------------------------------------
In those agencies with presidential appointees who are not Senate
confirmed, one could argue that it is the role of Congress to
prescribe, in law, whether the regulatory policy officer position
should be subject to Senate confirmation. To take this argument
further, even if an agency head designated a person in a Senate-
confirmed position as the agency's regulatory policy officer, one could
argue that this person would have to undergo another confirmation
process because the scope of the person's responsibilities had changed
significantly.
One other element of this process is also unclear, and may
represent a change in the scope of presidential influence in
rulemaking. The requirement that each agency head appoint one of the
agency's presidential appointees as the regulatory policy officer does
not apply to independent regulatory agencies. However, as originally
issued, Executive Order 12866 requires independent regulatory agencies
to develop regulatory plans, and the requirement in Executive Order
13422 that the ``Regulatory Policy Office'' approve items included in
the plan and the commencement of all rulemaking amends that section of
Executive Order 12866. Therefore, this provision could arguably be read
to require that independent regulatory agencies have presidential
appointees as regulatory policy officers, thereby extending the reach
of the President and presidential review into agencies that had not
previously been subject to such scrutiny (and commensurately lessening
the agencies' relationships with Congress, which created them to be
more independent of the President).
______
Madam Chairman, that concludes my prepared statement. I would be
happy to answer any questions that you or other Members of the
Subcommittee might have.
ATTACHMENT
Ms. Sanchez. I appreciate your testimony, Dr. Copeland, and
you actually went under the 5 minutes.
Mr. Noe, you are up.
TESTIMONY OF PAUL R. NOE, PARTNER, C&M CAPITOLINK LLC, AND
COUNSEL, CROWELL & MORING ENVIRONMENT & NATURAL RESOURCES GROUP
Mr. Noe. Chairman Sanchez, Ranking Member Cannon, Chairman
Conyers, distinguished Members of the Subcommittee, my name is
Paul Noe. I want to thank you for the honor to testify before
you on recent changes to the regulatory review process.
While I am in the private sector now, I have had the
privilege to spend most of my career in public service, much of
it on efforts to improve the regulatory process. From 1995 to
2001, I served on the Senate Governmental Affairs Committee as
counsel to Chairman Bill Roth, Ted Stevens, and Fred Thompson
on bipartisan regulatory reform efforts. Then until last May, I
worked as counselor to Dr. John Graham at OMB's Office of
Information and Regulatory Affairs. From my experience in
Congress and the Executive Branch, I developed a deep
appreciation for the importance of a coordinated interagency
regulatory review process. I also know that the public could
not expect more talented or dedicated public servants than
those I worked closely with at my time at OMB.
I should note that my testimony is my personal opinion, and
in my view, the recent changes to Executive Order 12866 and the
accompanying OMB bulletin on good guidance practices are
important and salutary steps toward good governance.
When President Bush issued the amendments to clarify and
strengthen President Clinton's Executive Order 12866, the
reactions were remarkable, in my view, compared with the actual
language. An attachment to my written statement shows how the
main Bush amendments modified President Clinton's Order. I
would like to make just a few points now about how the new
Order and the OMB bulletin can improve the regulatory process.
First, extending the existing regulatory review process to
significant guidance documents is an important improvement. The
Clinton Order appropriately sorted significant regulations from
the insignificant, but it neglected guidance documents, and
there is no doubt that guidance documents can be significant.
Concerns have been raised by many quarters that agency
guidances should be better coordinated, more consistent, more
transparent and accountable, and not be used as legally binding
regulations. There is a very strong foundation for these good
guidance practices. In fact, Congress required FDA to issue the
good guidance regulations that were a model for OMB when it
designed its bulletin.
Second, both the Clinton and the Bush Executive Order
required the agencies to identify the problem that justifies
regulation before proceeding, whether that problem is a market
failure, or something else. Although I think the Clinton market
failure language was adequate, the Bush Order makes a helpful
but modest change by asking the agencies to identify the
problem more precisely and in writing to clarify the merits of
going forward.
The Bush Orders language on market failure is simply not
new, nor is it radical, as some have suggested. In fact, very
similar language and much greater detail is in the Clinton
administration's 1996 guidelines for economic analysis under
Executive Order 12866.
I would submit that carefully considering market failures
is hardly a subversive way of thinking, and indeed, some of the
greatest regulatory successes were made possible by market-
based approaches that are based upon an understanding of market
failure. For example, in the 1990 Clean Air Act amendments,
Congress established a sulfur dioxide emissions training regime
that is one of the greatest success stories in the history of
environmental law. The results of that program were so
compelling that OMB supported EPA adopting this same approach
in the Clean Air Interstate Rule that Mr. Aitken mentioned. The
CAIR rule will cut power plant emissions dramatically by about
70 percent without the economic disruptions and hardships
associated with traditional command and control regulation. In
my view, it would be most unfortunate if the concept of market
failure and market based approaches that flow from it become
politicized at a time when they are critically important tools
in the regulatory policy tool kit.
Ms. Sanchez. Mr. Noe, you have hit your time, if you could
just briefly conclude.
Mr. Noe. Finally, I would like to say that some have
alleged the concept of regulatory policy officers is a radical
change from the status quo. I respectfully disagree, and I
would like to detail that further in question and answer.
In conclusion, regulatory policy is important and often
controversial. It is commendable that this Subcommittee is
making the effort to view carefully these recent changes and to
understand them. In my view, a careful review of the language
will allay any concerns.
Thank you.
[The prepared statement of Mr. Noe follows:]
Prepared Statement of Paul R. Noe
Ms. Sanchez. Thank you, Mr. Noe.
Professor Strauss, please proceed with your testimony.
TESTIMONY OF PETER L. STRAUSS, PROFESSOR, LCOLUMBIA UNIVERSITY
SCHOOL OF LAW
Mr. Strauss. Chairman Sanchez, Ranking Member Cannon,
Chairman Conyers, distinguished Members, thank you very much
for inviting me to testify before you today. Given the time
constraints, I hope you won't mind if I launch right into what
I have to say and not who I am.
Our Constitution is very clear, in my judgment, in making
the President an overseer of all the varied duties that you
create for Government agencies to perform. But the Constitution
is equally clear in permitting you to assign those duties to
them, to the agencies, and not to the President. He is not the
decider, but the overseer of decisions by others. When the
President fails to honor this admittedly subtle distinction, he
fails in his constitutional responsibility to take care that
the laws be faithfully executed. The assignment of decisional
responsibility to others is a part of the laws to whose
faithful execution he is obliged to see.
Executive Order 13422 amends the longstanding Executive
Order 12866 in a number of ways that you have heard about. I am
going to focus on two aspects of the Order that, in my
judgment, threaten this difficult but necessary balance between
politicians and experts, between politics and law, that
characterizes agency rulemaking.
First, amendments to sections 4 and 6 effect a dramatic
increase in the President's asserted control over regulatory
outcomes--an increase that, in my judgment, requires
congressional authorization that has not occurred.
The second amendment threatens a revival of a discredited,
remarkably expensive rulemaking procedure that delivers
substantial control over the timing and cost of rulemaking into
the hands of private parties, just those whose dangerous
activities proposed regulations are generally intended to
limit.
So first as to presidential control of rulemaking agendas.
The regulatory plan was first rationalized as an aid to the
political heads of administrative agencies, requiring career
staff to reveal their priorities and plans for rulemaking to
agency leadership in the same way that the annual budget
process does. It, I think, is sensible in that respect. It
injects the agency's political leadership into the picture
before matters get set in concrete. While there have been some
hints that it might be used for presidential control over the
years, trying to follow that issue I have never heard a whisper
of it until this Order.
President Bush's Order purports to confer legal authority
on a junior officer in each agency, whose identity has to be
coordinated with OIRA, to control the initiation of agency
rulemaking and, it seems to be intended, its continued
processing in the agency. Conferring this kind of authority is
Congress's business, not the President's, and I would urge you
not to do it. It diffuses political authority within the agency
that you would generally entrust to the agency head.
Congress, as well as the President, has political
relationships with the agency head. While the President can
cashier an agency head whose work he doesn't like, that comes
at high political cost, including having to get the Senate's
concurrence on a successor.
A well-connected friend remarked to me ``I have personally
watched two agency heads tell the President to pound sand. They
wouldn't do what they told and the President knew they had the
political capital to win.'' Junior officers appointed under
close White House supervision, knowing that they can be
dismissed at any moment--that is what it means to be a
presidential appointee--don't have this political capital.
There isn't much chance that firing them will have political
costs for the White House. They are not ever going to be
telling the President or OIRA to pound sand.
There are a number of gaps in the Order that make this
problem much worse, in my judgment. First, the Clinton
Executive Order provided that the regulatory policy officer
``shall report to the agency head.'' That language has been
deleted from the Executive Order. Second, the amended Order
doesn't tell us what kind of presidential appointee the
regulatory policy officer is to be. You have verbal assurances
oh, it will be someone confirmed by the Senate, albeit not for
that purpose. Here is a road around constraints that the
Constitution insists upon, that people who exercise major
authority in Government can do so only with the Senate's
blessing, as well as the President's. The consequence is
divided Administration within each agency, with real power
vested in a shadow officer who answers basically to the
President, not to the agency head.
Ms. Sanchez. Mr. Strauss, you have hit your time. If you
could just conclude briefly.
Mr. Strauss. Okay.
So let me conclude, if I may, with a suggestion for you. It
seems to me that this is a simple affront to two of Congress's
responsibilities: to confer organization and authority on
elements of Government by enacting statutes, and to approve in
the Senate all appointments to high office. You couldn't change
it directly, that would encounter a presidential veto, but
maybe there are the do not spend riders for appropriations
measures that have been used in the past that could be employed
to keep the President from paying salary to persons who are
doing work that you have not designated for those persons to
do.
In my printed remarks, I also address the question of
formal rulemaking, and I would be happy to address that in
question and answers.
[The prepared statement of Mr. Strauss follows:]
Prepared Statement of Peter L. Strauss
President Bush's recent amendments to Executive Order 12866Thank
you very much for inviting me to testify before you today. I am a
scholar of administrative law, who has had the privilege of teaching
that subject at Columbia Law School for the past 36 years and who for
two years in the 1970's had the honor of serving as the first General
Counsel of the Nuclear Regulatory Commission. I was later Chair of the
ABA's Section of Administrative Law and Regulatory Practice, a
consultant to the ABA's Coordinating Committee on Regulatory Reform,
and long-time chair of the Section's Rulemaking Committee. My 1984
analysis of agency relations with the President won its annual prize
for scholarship. I have continued since then to write about separation
of powers and, in particular, the President's constitutional
relationship to the agencies on which Congress has conferred regulatory
authority. Attached to this testimony is the current draft of my most
recent writing on this subject, an essay to be published this summer by
the George Washington Law Review entitled ``Overseer or `The Decider'--
The President in Administrative Law.'' This draft will have to be
revised in light of the executive order you are hearing about today,
but its bottom line will not. Our Constitution is very clear, in my
judgment, in making the President an overseer of all the varied duties
the Congress creates for government agencies to perform. Yet our
Constitution is equally clear in permitting Congress to assign these
duties to them and not to the President. He is not ``the decider,'' but
the overseer of decisions by others. When the President fails to honor
that admittedly subtle distinction, he fails in his constitutional
responsibility to ``take Care that the Laws be faithfully executed.''
The assignment of decisional responsibility to others is a part of
those laws to whose faithful execution he must see.
Our subject is Executive Order 13422, 72 Fed. Reg. 2763 (January
23, 2007), that amends the long standing Executive Order 12866,
concerning regulatory planning and review. Others here today may speak
to those elements of the order that reach guidance documents, another
of its important elements, and that heighten the specificity of the
analysis the order requires agencies to perform. I will leave those
elements largely to them. Let me say only, as a long-time advocate of
the proper use of guidance to help the public deal with agency
regulatory standards, that I find the extension of the order to
guidance documents possibly troubling only in its details. As a long-
time supporter, as well, of the President's constitutional authority
and wisdom in commanding regulatory analyses in connection with
important rulemakings, I find that heightened specificity troubling
only insofar as it may be administered to require agencies to decide
matters on the basis of factors Congress has not authorized them to
consider.
In these remarks I want to address two other aspects of the order,
that I find particularly troubling--first, enhancements to the existing
provisions respecting the regulatory planning office and officer that
amended Sec. 4(c)(1) of E.O. 12866 by adding
Unless specifically authorized by the head of the agency, no
rulemaking shall commence nor be included on the Plan without
the approval of the agency's Regulatory Policy Officer,
and Sec. 6(a)(2) of EO 12866 by adding
Within 60 days of the date of this Executive order, each agency
head shall designate one of the agency's Presidential
Appointees to be its Regulatory Policy Officer, advise OMB of
such designation, and annually update OMB on the status of this
designation.
and second, an entirely new idea added to Sec. 6(a)(1) of EO, requiring
that
In consultation with OIRA, each agency may also consider
whether to utilize formal rulemaking procedures under 5 U.S.C.
556 and 557 for the resolution of complex determinations.
Both additions threaten to disturb the difficult but necessary
balance between politicians and experts, between politics and law, that
characterizes agency rulemaking. The first threatens a dramatic
increase in presidential control over regulatory outcomes, to an extent
Congress has not authorized and in my judgment must authorize. The
second threatens redeployment of a discredited, remarkably expensive
rulemaking procedure that delivers substantial controls over the timing
and cost of rulemaking into the hands of private parties--notably, I
fear, those whose dangerous activities proposed regulations are
intended to limit.
i. presidential control of rulemaking agendas
When President Reagan elaborated the idea of a regulatory agenda in
Executive Order 12498,\1\ Christopher DeMuth, who had responsibilities
for these issues in his administration, characterized it as essentially
an aid to the political heads of administrative agencies--requiring
career staff to reveal their priorities and plans for rulemaking to
agency leadership, just as the annual dollar budget process does, and
consequently injecting the agency's political leadership into the
picture before matters got set in bureaucratic concrete. Seen in this
way, the measure supported Congress's assignments of responsibility--it
is, after all, on the agency's political leadership alone that
Congress's statutes confer the power to adopt rules. To judge by its
own actions in measures like the Regulatory Flexibility Act, Congress
like the private community was also attracted by the transparency and
added opportunities for broad public participation early notice of
rulemaking efforts would provide. President Clinton's Executive Order
12866 continued and in some ways strengthened this measure, requiring
agencies to designate a regulatory policy officer who would coordinate
general issues under the Executive Order--in effect be the agency's
designated contact person for the OMB Office of Information and
Regulatory Affairs (OIRA). While there were hints that it might be used
to effect presidential control over agency policy choices, after years
of paying fairly close attention to this question in my scholarship and
professional associations, I have never heard that that had happened.
On specific issues of importance to him, as Dean Elena Kagan of Harvard
has detailed, President Clinton through his domestic policy office--not
OIRA--would issue directives to particular agencies on particular
issues of importance to his program. President Bush's first head of
OIRA, John Graham, initiated a practice of occasional ``prompt
letters'' publicly directing agency attention to matters that he
concluded might warrant regulation. But a general centralization of
actual control over regulatory agendas, so far as I could tell, was
never effected. Until this order.
---------------------------------------------------------------------------
\1\ A predecessor provision may be found in President Carter's E.O.
12044.
---------------------------------------------------------------------------
President Bush's order purports to confer authority on a junior
officer in each agency, whose identity must be coordinated with OIRA,
to control the initiation of agency rulemaking and, it seems to be
intended, its continued processing within the agency. I would have
thought conferring this kind of authority Congress's business, not
something the President is authorized to accomplish on his own say-so.
And if Congress were to ask my judgment about such a step I would call
it unwise--as a diffusion of political authority within the agency,
that Congress generally entrusts to the agency head. While legislation
may permit the head to subdelegate some of her authority to persons she
trusts and will take responsibility for, it wisely has rarely if ever
permitted subdelegation of ultimate control over rulemaking, and it
certainly would be unwise to permit that to persons who are controlled
by others outside the agency. Congress as well as the President has
political relationships with the agency head. While the President has a
formal capacity to discipline agency heads whose work displeases him,
that capacity is sharply limited by the political costs of doing so--
including the necessity of securing senatorial confirmation of a
successor. As a well-connected friend of mine recently remarked,
I personally have watched two agency heads tell the President
to pound sand--they wouldn't do what they were told and the
President knew they had the political capital to win.
Junior officers, given their responsibilities in a process under close
White House supervision, knowing as ``presidential appointees'' that
they can be dismissed at any moment, and lacking both this political
capital and much prospect that their dismissal would have, in itself,
political costs for the White House, are not ever going to be telling
the President or OIRA to pound sand.
A number of gaps in the order make this problem, in my judgment, a
lot worse.
First, the Clinton executive order reinforced
ordinary agency hierarchy by providing in Sec. 6(a)(2) that the
regulatory policy officer ``shall report to the agency head.''
That language has been omitted. Now it is at least ambiguous to
whom the RPO reports. Anyone aware of the change--the agency
head, for example--will know that this mandatory relationship
has been eliminated.
Second, the amended order now requires that the
``policy officer'' be a ``presidential appointee,'' but it
doesn't tell us what kind of presidential appointee--one who
must also be confirmed by the Senate? One the President can
name without need for confirmation? Perhaps a non-career
officer in SES, whose appointment occurs only after White House
clearance and with a presidentially-signed commission? If it is
either of the latter, then the President has found his way
around the constraints the Constitution insists upon, that
people who exercise major authority in government can do so
only with the Senate's blessing as well as his. Then it becomes
obvious that the President has created a divided administration
within each agency, with real power vested in a shadow officer
who essentially answers only to him. As my friend also
remarked, this would be ``disastrous.''
First as a practical matter it takes regulatory power
away from the head of the agency where Congress has vested it.
Second, it continues the political accretion of power in the
bureaucracy of the White House, away from public scrutiny. But,
the worst part from my vantage point is that it treats the
agency as a conquered province--the career staff is explicitly
told it is distrusted and is not to make recommendations to the
agency head but to the White House's political officers. That
in turn destroys communication between the staff and the
political level of the agency. And, the agency is quite
ineffective when that happens.
Third, it is unclear to what extent the new controls
extend to the independent regulatory commissions. Section 4's
language, including the requirement that ``Unless specifically
authorized by the head of the agency, no rulemaking shall
commence nor be included on the Plan without the approval of
the agency's Regulatory Policy Officer,'' is explicitly
applicable to independent regulatory commissions. Section 6,
that defines the regulatory policy officer's appointment, is
not. As a legal requirement of agencies Congress has chosen to
constitute as independent regulatory commissions, this is truly
extraordinary.
The final gap I want to note for you, one of signal
importance in my judgment, concerns political access. Among the
elements that have made the Executive Order regime acceptable
to Congress, and I might add to much of the academic community,
are the commitments it contains to a professionalized,
unusually transparent and apolitical administration. Oral
contacts with outside interests are limited to OIRA's senate-
confirmed Administrator or his particular designee; agencies
attend any meetings with outsiders; written communications from
outsiders are also logged; and all of this information is
publicly disclosed. My understanding is that Congress has
properly insisted on these elements of transparency, as a
condition of its acceptance of this generally valuable regime.
The OIRA website, within a generally closed White House
environment, has been a remarkable monument to the worth of
this insistence.\2\ The professional qualities, too, of OIRA's
staff, and the striking qualities of its leadership over time,
have offered reassurance. Notice that none of these constraints
are made applicable to the Regulatory Policy Officer or his
office.
---------------------------------------------------------------------------
\2\ This is not the setting to explore the accounts I am beginning
to hear of increasing, and in my judgment, regrettable, politicization
and transparency violations in OIRA functioning--for example,
deliberate holding back the clock on formal submission of agency
proposals to OIRA, so that negotiations and ``adjustments'' can be
complete before the transparency provisions of EO 12866 kick in. See
United States General Accounting Office, Report to Congressional
Requesters,''RULEMAKING, OMB's Role in Reviews of Agencies' Draft Rules
and the Transparency of Those Reviews'' GAO-03-929, September 2003, pp.
47-48. When evidence of OIRA changes has been available, it has been
available to assist reviewing courts in determining whether agencies
have themselves reached the decisions statutes commit to their
responsibility, and done so only on consideration of the statutorily
relevant factors. See Riverkeeper, Inc. v. EPA, No. 04-6692-ag(L), 2007
U.S. App. LEXIS 1642 (2d Cir. Jan, 25, 2007), where the published
documents showed 58 ``major'' changes having been made ``at the
suggestion or recommendation'' of OIRA at the proposal stage, and 95
``major'' changes made ``at the suggestion or recommendation'' of OIRA
in the rule as finally promulgated.
So the President has attempted to do by executive order something
that, in my judgment, can only be done by statute. Moreover, in doing
so he threatens excessive politicization of agency rulemaking, the
subversion of a public process by back-corridor arrangements, and
compromising the lines of authority Congress has created. These
officers will, in practice, be answerable only to him, as is
underscored by the disappearance of ``shall report to the agency head''
from Sec. 6(a)(2). Their conversations with him, his lieutenants, and
any political friends he may send their way will be invisible to us.
You will likely hear from the other side that the President is,
after all, our chief executive, that our Constitution embodies the
judgment that we should have a unitary executive, and so even if the
result were to convert agency judgments about rulemaking into
presidential judgments, that would only be accomplishing what the
Constitution commands. This is the subject of the writing I have
attached to this testimony. In my judgment it is not only an erroneous
argument, but one dangerous to our democracy. The President is
commander in chief of the armed forces, but not of domestic government.
In domestic government, the Constitution is explicit that Congress may
create duties for Heads of Departments--that is, it is in the heads of
departments that duties lie, and the President's prerogatives are only
to consult with them about their performance of those duties, and to
replace them with senatorial approval when their performance of those
duties of theirs persuades him that he must do so. This allocation is
terribly important to our preservation of the rule of law in this
country. The heads of departments the President appoints and the Senate
confirms must understand that their responsibility is to decide--after
appropriate consultation to be sure--and not simply to obey. We cannot
afford to see all the power of government over the many elements of the
national economy concentrated in one office.
Professor Peter Shane, a highly respected scholar of the presidency
and a former lawyer in the Office of Legal Counsel, put the matter this
way in a recent discussion of President Bush's use of signing
statements, which I know is not our subject today.
The Bush Administration has operated until recently in
tandem--can there be a three-part tandem?--with Republican
Congresses and a Supreme Court highly deferential to executive
power. . . . It has not only insisted, in theory, on a robust
constitutional entitlement to operate free of legislative or
judicial accountability, but it has largely gotten away with
this stance. And that success--the Administration's unusual
capacity to resist answering to Congress and the courts--has
fed, in turn, its sense of principled entitlement, its theory
that the Constitution envisions a Presidency answerable, in
large measure, to no one.
Critics of the Administration have not infrequently charged
that the Administration's unilateralism is antagonistic to the
rule of law. After all, the ideal of a ``government of laws,
not of men'' seems conspicuously at odds with a President's
expansive claims of plenary authority. But no sane President
claims to be above the law and, indeed, President Bush takes
pains repeatedly to defend his controversial actions as legal,
including the widespread warrantless electronic surveillance of
Americans, the incarceration of U.S. citizens as enemy
combatants, and the intense interrogation of detainees in Iraq
and Afghanistan. I doubt that President Bush thinks himself
antagonistic to the rule of law; he just has a different idea
of what the rule of law consists of. But what the
Administration seems to believe in is a version of the ``rule
of law'' as formalism. It is the rule of law reduced to ``law
as rules.'' Under the Bush Administration's conception of the
rule of law, Americans enjoy a ``government of laws'' so long
as executive officials can point to some formal source of legal
authority for their acts, even if no institution outside the
executive is entitled to test the consistency of those acts
with the source of legal authority cited. . . .
The Bush signing statements, like the doctrines they
advocate, are a rebuke to the idea of the rule of law as norms
or process. They are a testament to the rule of law as law by
rules, preferably rules of the President's own imagination.
This executive order is cut from the same cloth.
What might Congress do about this? This looks like a simple affront
to two of Congress's responsibilities--to confer organization and
authority on elements of government by enacting statutes, and to
approve (in the Senate) all appointments to high office (thus creating
one of the Constitution's many checks on unilateral authority in any
branch). Change here, though, would likely encounter a presidential
veto. Can you find a way to avoid that? There remains the power of the
purse. While the use of ``do not spend'' riders in appropriations
measures has often been criticized, perhaps this is a setting in which
such a rider would be appropriate, attached to a budget the President
will find himself compelled to sign. Why should Congress tolerate the
expenditure of government funds to pay the salary of one whose powers
it has not authorized, and whose functioning can prove destructive of
the public institutions it has worked to create?
ii. outsider control of rulemaking
I can be much briefer in addressing the provision of the executive
order that invites agencies to ``consider whether to utilize formal
rulemaking procedures under 5 U.S.C. 556 and 557 for the resolution of
complex determinations,'' ``in consultation with OIRA.'' This is
permissively worded, but one must wonder how permissive its
implementation will be. And the point to note is that the difference
between ``formal rulemaking procedures under 5 U.S.C. 556 and 557'' and
the notice-and-comment procedures agencies generally employ, is that
the former put rulemaking under the procedural control of an
administrative law judge, a person trained in trials not policy-
setting, and confer on participants in the rulemaking the kinds of
rights parties to trials have--rights to put on witnesses, engage in
cross-examination, and in other ways slow rulemaking down and add to
its internal costs. It is, simply, the delivery of the henhouse to the
foxes.
Experience with on-the-record rulemaking led to its virtual
abandonment decades ago, and for good reason. Those familiar with the
process have recognized for 40+ years that it is simply too clumsy to
work except in very isolated instances. In its 1973 judgment in U.S. v.
Florida East Coast Rwy, 410 U.S. 224, the Supreme Court essentially
ruled that agencies did not need to use it in the absence of the
clearest of statutory instructions. Congress hasn't been giving those
instructions, and agencies haven't been using that process ever since,
and for good reason. Experience has taught us that the use of formal
rulemaking is cumbersome and out of all proportion to its benefits
because trial-type hearings are poorly suited for determinations that
turn on policy judgments, and too subject to unwarranted extension and
complication by the participant parties. Why, then, revive it now? Just
to help one's friends slow things down--throw a good dose of sand into
the gears of rulemaking?
Thank you for the opportunity to address you today. I would be
happy to answer any questions you might have.
Ms. Sanchez. Thank you, Professor Strauss.
I want to thank all of the panelists for testifying today,
and I want to remind you that your full written statements will
be placed into the record.
We are now going to proceed with questions under the 5-
minute rule, and I will begin by recognizing myself for 5
minutes.
Mr. Aitken, you noted that Executive Order 13422 encourages
rulemaking agencies to consider using the Administrative
Procedure Act's formal rather than informal rulemaking
procedures for the agency's resolution of complex
determinations. Why do you think that that encouragement is
necessary?
Mr. Aitken. Thank you for your question.
The reason that that provision is in the Executive Order is
simply to remind agencies that under the Administrative
Procedure Act, they have a tool in their tool belt that they
can use to resolve complex determinations. As I mentioned in my
prepared testimony, that provision has been in the
Administrative Procedure Act for decades. Agencies have been
able to use that authority for decades, and the Executive Order
simply reminds the agencies of this authority and encourages
them to consider it.
Ms. Sanchez. But is there any evidence to the contrary that
they don't use the formal rulemaking procedures when
appropriate and necessary?
Mr. Aitken. I don't think the Executive Order is premised
on a view that agencies were using it insufficiently; it simply
reminds agencies that there is a provision in the APA that is
available for their use if they believe it is appropriate.
Ms. Sanchez. Okay, thank you.
Professor Katzen, what do you believe Congress should do
about this Executive Order? Congress, as Professor Strauss
suggested, could put a rider on OMB's or an agency's
appropriation prohibiting the implementation of the Order, or
is there something else that Congress can do?
Ms. Katzen. As an alum of OMB, I am always somewhat nervous
about talking about riders on spending bills.
I think, first and foremost, you have done the right thing
by calling a hearing. Oversight by Congress is incredibly
important and has not been in vogue for the last several years.
Knowing that you will be held accountable and asked why is this
section in there, what does that section do, what is the
problem, has a very salutary effect. I also believe that Dr.
Copeland has put his finger on something with respect to the
appointments power and Senate confirmation. I personally
believe that if you are going to hold the position of
regulatory policy officer as it is described in here and not be
reporting directly to the head of the agency, which was the way
we had structured the job, then it would be appropriate for the
Senate to inquire as to both the competence and the temperament
and perhaps the regulatory philosophy of the person who would
hold that job. And so I would use the power of appointment.
Authorizing Committees could also do legislative work. As I
said, these are the agencies. These are not free agents. They
do what Congress has told them to do, and if Congress says that
a factor is to be--is irrelevant or not to be considered, the
agencies will follow and the Executive Order as originally
structured said ``subject to existing law,'' that means subject
to what you all say. So I would use those routes.
Ms. Sanchez. I appreciate your answer.
Mr. Noe, will Executive Order 13422, as asserted by New
York Times columnist Paul Krugman, ``make it easier for
political appointees to overrule the professionals, tailoring
Government regulations to suit the interests of companies,''
and if not, please explain.
Mr. Noe. Madame Chair, I think the answer is no because I
think that the changes that are made, for example, to the
provisions on regulatory policy officer are insignificant,
other than creating greater, not less, political
accountability.
This position was created by the Clinton Order. There was
no constraint on who could serve as a regulatory policy
officer. You could have had someone who was non-accountable to
the Congress serve in that position. Under the change, the
benefit for Congress will be that person will serve in a
congressionally created position that is typically subject to
Senate confirmation, and typically engages with the Congress in
oversight. So I think as far as oversight committees go, this
Executive Order is good news.
Ms. Sanchez. Professor Katzen, I notice that you did not
seem to agree. Could you just briefly respond to that?
Ms. Katzen. Under the Clinton Order, the regulatory policy
officer had to report directly to the agency head. That was the
accountability within the agency.
Ms. Sanchez. Okay, thank you.
I would now like to recognize the Ranking Member of my
Subcommittee, Mr. Cannon, for 5 minutes.
Mr. Cannon. I think we have identified the problem, and it
is not you, Ms. Katzen, it is the mic--the button. We are going
to have to get that fixed.
It has been very interesting hearing, a little more
animated than I would have guessed at the outset. We have Dr.
Copeland, who is very jealous of Congress's prerogatives and
his comments were directed that we have two people that have
the view that Government and bureaucracy has a tendency to
perpetuate itself and sometimes perpetuate stupidity. We have
two people, Professor Katzen and Professor Strauss, who believe
that bureaucracy should be a counterweight to the role of the
President. And of course, that is, at least in this given
presidency, you have some conflict with the stayed problems
that this Administration has decided exist within the
regulatory context. I personally served in an agency. I had 100
lawyers who worked for me. We developed regulations and I have
the greatest respect for civil servants. The problem is civil
servants are part of bureaucracy, and bureaucracies don't
change very quickly.
So what we are dealing with here, it seems to me at a
higher level, is how we deal with a world that has changed
radically around us and has resulted in a proliferation of
Government law in the context where we don't have--we, that is,
Congress, does not have the kind of controls that these--
Professor Katzen and Professor Strauss and Dr. Copeland are
insisting are important here.
Let me just--one example that I had, a political friend
came in and told me that I should take the Code of Federal
Regulations into my next meeting. I said, do you know how tall
that is? And then he raised his arm about six feet high, and I
said when was the last time you saw the Code of Federal
Regulations? I brought him down here and showed him our
library--Majority's library. Our library, I guess, but in their
side. He was dumbfounded. He was absolutely dumbfounded
because--I don't know what it is, but my guess is that if you
stack the Code of Federal Regulations up it would be about 25
or 30 feet, far more than what he had anticipated, and that
doesn't include the guidance documents and the informal
guidance which never gets in a document. What we have here is a
Government that has vastly insinuated itself in the fabric of
American life. And Professor Strauss, you mentioned that we are
dealing with dangerous people who we have to control. Granted,
there are people who will take advantage. We need sometimes to
have some control, especially--well, there are some things we
need to control and probably some things that we just interfere
with and cause pain and suffering by trying to control.
And so what I would hope--we have worked together over a
long period of time, many of us, on the APA. Many of these
issues are going to be--are issues that we need to look at from
the very highest level. In other words, there are differences
that are very apparent in this discussion and I think those are
legitimate differences, but we need to take a look at how we
actually govern ourselves and look back at the APA to get some
guidance.
We need to come up with a thoughtful bipartisan new
approach to the APA that will allow us to deal with this much
more complex world that we are engaged in, because really what
we are talking about here--I mean, for people who don't
understand this discussion, we are not talking about
regulations. We are not talking about law. We are not talking
about that law which is passed by Congress and signed by the
President. We are talking about guidance when a company or a
person has a problem understanding what a regulation means in
his evolving business environment or other environment in his
life, and he says tell me what this means. And that answer can
come from a bureaucrat in a regional office who may not want to
be bothered, or it can come through a process that evolves into
a directive that has profound influence. And in the world today
with oil at 70, 80, 90, maybe at some point in the future $100
a barrel, that drives issues and creativity and that is just
one of the many things that are happening in our society.
Communication has evolved rapidly. That drives innovation and
we find ourselves regulating in a context of a presumed danger,
when at the same time we have great opportunities for a better
society.
And so I am--I actually very rarely do this. I have
lectured and I apologize, but what I hope comes out of this
discussion is that instead of blaming this President--and by
the way, Professor Katzen and Professor Strauss, your comments
were well-taken and I appreciate them, and you have educated me
on the subject. But this seems to be a canard. It seems to be
off the track of what we need to do as a Committee, and Dr.
Copeland, from your perspective, we need--and others in the
audience, we need to deal with a world that is different,
entirely different from the world that we inherited 10 or 20 or
45 years ago, 44 years ago when we passed the APA the first
time----
Ms. Sanchez. The gentleman's time has expired.
Mr. Cannon. I thank the gentlelady for indulging me, and
yield back.
Ms. Sanchez. Thank you.
The gentleman from Michigan is recognized.
Mr. Conyers. I thank the gentlelady and Chair.
The gentleman from Utah can tell the witnesses that he
doesn't lecture very often, but you know, we are on the
Committee, Chris. We know a lot better than that. And we enjoy
your criticisms and comments.
I would ask unanimous consent to place into the record Paul
Krugman's ``New York Times'' column of February 5, 2007.
Ms. Sanchez. Without objection, so ordered.
[The information referred to follows:]
Mr. Conyers. And I hate to read the last two sentences,
because we may get another lecture before this hearing is over.
``What's truly amazing is how far back we've slid in such a
short time. The modern civil service system dates back more
than a century; in just six years the Bush administration has
managed to undo many of that system's achievements. And the
Administration still has two years to go.''
You know, this brings in the notion of conservatism,
contracting, and I need some guidance from some of our
witnesses. We have got the appropriations process, passing
laws, confirmation proceedings, and any succeeding President
can revoke any Executive Order that he or she chooses. Those
aren't a very tasty set of options to me. What do you think,
Professor Strauss? Is there--it seems like we are something
like in the position of trying to get out of Iraq. We don't
want to cut off the funds. We are--we want to pass non-binding
resolutions. We want to voice our opposition.
Mr. Strauss. I find a lot of merit in that analogy,
unhappily. I think you are stuck. I mean, if you were to take
the position which, in my judgment, is the right position, that
authorizing someone in Government to act with the force of law,
which is what this Executive Order does for the regulatory
policy officer, is something that only Congress can do and the
President can not do. You are not in the position of being able
to undo that by a simple statute unless you can get it past a
presidential veto, which as I read the newspapers, my guess is
you can not. So then you are left with a series of unpalatable
other alternatives. I don't, myself, like appropriations riders
at all. I think they have been misused in the past, but----
Mr. Conyers. I don't even think we can sue in court, unless
it is a constitutional issue.
Mr. Strauss. I don't know how.
Mr. Conyers. How did you find this subject matter to start
the hearing off on administrative law? I mean, this is more
difficult than most of the other issues that we handle. I am
wondering--perhaps a very detailed examination of this is going
to make it clear to the public. I mean, this may be another
case for public sentiment to kick in, because most people of
course haven't the vaguest idea that this has occurred.
Mr. Strauss. Newspaper reporters tend to describe stories
about process, as one did to me in the work-up of this
occasion, as three bowlers. That is to say, the reader's face
will predictably plop in the oatmeal three times before they
finish the story. I don't know that it will be easy to make it
into----
Mr. Conyers. Dr. Copeland, what is your diagnosis here?
Mr. Copeland. I would refer to a document that was prepared
by a colleague of mine at CRS, TJ Halstead, on Executive
Orders, and he mentions previous instances where Congress has
revoked them, most recently Executive Order 12806, where
Congress revoked an Order by President George H.W. Bush to
establish a human fetal tissue bank for research purposes. To
effectuate this repeal, Congress simply directed that ``The
provisions of Executive Order 12806 shall not have any legal
effect.'' While this seems to be the most recent action, there
have been numerous similarly revoked Executive Orders.
So there is precedent for Congress revoking Executive
Orders.
Ms. Sanchez. The time of the gentleman has expired.
Mr. Conyers. Thank you.
Ms. Sanchez. Thank you.
I now recognize the gentleman from Georgia, Mr. Johnson,
for 5 minutes.
Mr. Johnson. Thank you. I have got some questions, Mr. Noe.
You were quoted in the Washington Post as saying that the
controversy about this new Executive Order is ``a tempest in a
teapot.'' Given that the Order appears to create a cadre of
presidentially appointed regulatory police officers who no
longer report to the agency heads who designate them, how can
this be considered a ``tempest in a teapot''? Isn't it more
serious than that, more fundamentally earth-shaking than that?
Mr. Noe. Thank you for your question, Congressman.
The reason I would call it a ``tempest in a teapot'' is
because I think a lot of the concerns that were raised in the
initial press reports were not based on a reading of the actual
language of the Order, or an understanding of what was already
in the existing Executive Order that President Clinton issued.
It was not based on an understanding that these regulatory
policy officers were not created by President Bush, they were
created by President Clinton, and----
Mr. Johnson. But this is a fundamental reordering of this
Executive Order, is it not?
Mr. Noe. Well, sir, I think that the main change in that
part of the Order is to say a regulatory policy officer, who
admittedly was appointed by the agency head under the old
Order, now actually had to be in a congressionally created
position which is going to be more accountable politically and
more accountable to congressional oversight, I would submit,
than what was previously undefined. And that is what I mean
when I say I think that there has been a lot of
misunderstanding about these provisions, that when they are
actually read closely I don't think there is less political
accountability. I don't there is anything new or radical. I
actually think this could be used to provide greater
accountability to the Congress, and I respect the importance of
that, having worked in Congress as a staffer for 7 years.
Mr. Johnson. Well, you were also quoted as saying that the
Executive Order promotes better informed and more accountable
regulatory decisions. Can you explain that a little more?
Mr. Noe. Yes, sir.
I think it is a real improvement over President Clinton's
Order to include guidance documents within the interagency
review process, because I have seen many instances where
businesses, small businesses especially where people can not
keep up with these things, schools, farmers are hurt or
affected by these things and they don't have any idea that they
are coming at them. They have no idea of how to access them.
And I could tell you, just having heard a number of stories
about this, that I think it is very important that that very
important component of regulation is brought within the
interagency review process. I think that is a big improvement.
Mr. Johnson. Professor Katzen, what is your response?
Ms. Katzen. Well, I find it ironic that on one hand they
say it is not doing anything, and on the other hand they say it
is doing something. I really don't think they can have it both
ways.
On the guidance documents, they do not have the force and
effect of law, but they do have an influence, and I am
interested in the fact that in Mr. Aitken's testimony he keeps
referring back to the FDA guidance process. That process had
Congress intimately involved. It was Congress that authorized
the FDA to----
Mr. Johnson. By the way, Mr. Noe was here before you came
in and he made sure to change that microphone.
Ms. Katzen. I am not paranoid, it just doesn't work.
But Congress was the one that authorized the FDA to issue
these guidance documents. Congress was the one that called for
public participation. So if you are using the FDA guidance
documents as a model, then Congress needs to be involved.
Incidentally, Congress did not authorize OMB to review those
FDA guidelines that it authorized. What has been done here is
like cherry picking, where they take what they like and they
add to it what they really like, and they now have got a
different kind of an animal.
The bottom line is that Congress has to act. Congress has
to become involved, and I think that whether it is looking at
the APA generally or looking at the provisions of how the
Executive Order is being implemented, Congress has a
constitutional obligation and a constitutional role to play,
and I encourage you to do it.
Mr. Johnson. Professor Strauss, in your testimony----
Ms. Sanchez. The time of the gentleman has expired.
Mr. Johnson. All right, thank you.
Ms. Sanchez. It is now my pleasure to recognize the
gentleman from Massachusetts, Mr. Delahunt, for 5 minutes.
Mr. Delahunt. Thank you, Madame Chair. It is very
reassuring to serve on this Committee under your leadership.
Professor Katzen, it is good to see you once more.
You know, I look at this in a larger sense. We have had an
Administration that has spoken time and time again about this
concept of--I think the term is unitary Executive power, which
I view as a continuing encroachment on legislative authority. I
see this just as another piece of that. Is that a comment that
you would like to respond to, Professor Strauss?
Mr. Strauss. I think you heard that from Professor Katzen
as well. There has been----
Mr. Delahunt. I came too late for her testimony.
Mr. Strauss. There has been a clear acceleration, and to be
fair about it, this is a process that began with President
Nixon, and since his Administration, President after President
has done more and more to bring the bureaucracy within the
political influence over the White House. I think what Mr.
Cannon had to say in his statement has an awful lot of merit to
it.
The question for me is when you cross the line, you have
some wish to have not only politics, but also expertise, and
when what one sees is just politics, one gets----
Mr. Delahunt. Well, I think maybe, you know, the Ranking
Member and I would agree on some of this. I think this is an
institutional--this is institutional combat, if you will. And I
think we have got to be prepared to go to war. Enough is
enough, and without even getting into the merits of this
particular Executive Order, because I think it is a statement
as to whether this institution, the first branch of Government,
has the capacity to retain its constitutional authority. And I
would hope that, given the leadership of Congresswoman Sanchez,
that there might exist the possibility of a discussion with the
Executive Branch to determine what modifications ought to occur
from the perspective of Congress as to this Executive Order,
and if that just simply is not feasible, if it is not welcome
by the Administration, then we ought seriously consider
legislative action rescinding the Order.
Mr. Cannon. Would the gentleman----
Mr. Delahunt. I yield to my friend from Utah.
Mr. Cannon. Thank you. You know, we live in a very
political world and we just lost on the Republican side and
were much chastened.
But let me just remind the gentleman that when you suggest
we go to war over this issue that America has changed
profoundly. Before President Reagan, at the beginning of his
Administration, the vast majority, over 60 percent of all
people were employed by large corporations of over 5,000
employees. Today, the vast majority are employed by small
companies. So what we are doing here, and what I hope this
Committee will do over the long term, is create a context where
Americans can thrive, and in this battle, we need to remember
that this is not us against the President, although Dr.
Copeland, as you are aware, I am keenly concerned with the
prerogative----
Mr. Delahunt. Reclaiming my time.
I am not in disagreement and I clearly am sympathetic to,
you know, the small business owner. I think Members of Congress
are. That is not the issue here.
The issue is whether this is appropriately within the
prerogative of Congress pursuant to our constitutional
authority, and if it is, I think that we can demonstrate as
much sympathy and support for the small business community.
This, to me, is a constitutional issue. It has got nothing to
do with the merits of a particular Executive Order. I mean, I
am concerned. I mean, the--what was the book, the Imperial
City. I mean, we had political appointees there that were
running the Stock Exchange who didn't have a degree in
economics. You know, is there--I haven't really--I will
acknowledge that I haven't read the Executive Order, but the
idea of some sort of confirmation process by the Senate just to
assure Members of Congress that we are getting people who have
an expertise and are not just simply political appointees like
we see. We have seen them in Iraq, we saw them in the aftermath
of Katrina, and there was much to be revealed.
I don't mean to just beat up on the Bush administration,
but they are handy right now.
Ms. Sanchez. The time of the gentleman has expired.
I would like to thank again all the witnesses for their
testimony. Members may have additional written questions for
our witnesses which we will forward to you and ask that you
answer as promptly as you can so that they can be made part of
the record.
Without objection, the hearing record----
Mr. Delahunt. Madame Chair?
Ms. Sanchez. The gentleman is recognized.
Mr. Delahunt. If I could ask for unanimous consent for an
additional minute.
Ms. Sanchez. The gentleman----
Mr. Delahunt. I would like to congratulate the Chair for
conducting her first hearing. You did it with your customary
aplomb and professionalism, and I know I speak for Mr. Cannon.
We all look forward to working with you.
Ms. Sanchez. Thank you.
As I was saying before I was so pleasantly interrupted, we
will be submitting additional questions in writing. We ask that
you respond to those questions so that they can be--as quickly
as you can so that they can be made part of the record.
Without objection, the hearing record will remain open
until the close of business on Friday for the submission of
additional materials.
[The material in the following list was submitted by the
Minority for inclusion in the hearing record. The material is
not reprinted in this hearing but is on file at the
Subcommittee. The information referred to is as follows:]
List of material submitted by the Minority for inclusion
in the hearing record
1. Food and Drug Administration Modernization Act of 1997, 21 U.S.C.
Sec. 371(h)
2. ``Food and Drug Administration Modernization and Accountability
Act of 1997,'' S. Rep. 105-43, at 26 (1997)
3. Executive Order No. 13422, 72 Fed. Reg. 2763 et seq. (Jan. 23,
2007)
4. Executive Order No. 12866, 58 Fed. Reg. 51,735-44 (Oct. 4, 1993)
5. Executive Order No. 13258, 67 Fed. Reg. 9,385-86 (Feb. 28, 2002)
6. Redline-strikeout version of E.O. 12866 as amended by E.O. 13422
7. U.S. Office of Management and Budget Bulletin No. 07-07, ``Final
Bulletin for Agency Good Guidance Practices,'' 72 Fed. Reg. 3,432-40
(Jan. 25, 2007)
8. U.S. Office of Management and Budget, ``Proposed Bulletin for Good
Guidance Practices,'' 70 Fed. Reg. 71866 et seq. (Nov. 30, 2005)
9. U.S. Office of Management and Budget Circular A-4, ``Regulatory
Analysis,'' (Sept. 17, 2003)
10. U.S. Office of Management and Budget, ``Stimulating Smarter
Regulation: 2002 Report to Congress on the Costs and Benefits of
Federal Regulation,'' (2002)
11. U.S. Office of Management and Budget, ``Draft 2002 Report to
Congress on the Costs and Benefits of Federal Regulation,'' 69 Fed.
Reg. 15014 et seq. (March 28, 2002)
12. U.S. Office of Management and Budget Memorandum, ``Economic
Analysis of Federal Regulations under Executive Order No. 12866,''
(Jan. 11, 1996)
13. U.S. Office of Management and Budget, M-00-08, ``Guidelines to
Standardize Measures of Costs and Benefits and the Format of Accounting
Statements,'' (March 22, 2000)
14. Regulatory Program of the United States (April 1, 1990 March 31,
1991), at pp. 653-54
15. Appalachian Power Co. v. EPA, 208 F.3d 1015, 1019 (D.C. Cir. 2000)
16. Robert A. Anthony, ``Interpretive Rules, Policy Statements,
Guidances, Manuals and the Like--Should Federal Agencies Use Them to
Bind the Public?'' 41 Duke L.J. 1311 (1992)
17. Robert A. Anthony, `` `Interpretive' Rules, `Legislative' Rules
and `Spurious' Rules: Lifting the Smog,'' 8 Admin. L.J. (Spring 1994).
Ms. Sanchez. I thank everyone again for their time and
patience, and without objection, the hearing of the
Subcommittee on Commercial and Administrative Law is adjourned.
[Whereupon, at 3:30 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
Post-Hearing Questions and Responses for Steven D. Aitken, Acting
Administrator, Office of Information and Regulatory Affairs, Office of
Management and Budget
Post-Hearing Questions and Responses for Sally Katzen, Professor,
University of Michigan Law School
Post-Hearing Questions and Responses for Curtis W. Copeland, Ph.D.,
specialist in American National Government, Congressional Research
Service
Post-Hearing Questions and Responses for Paul R. Noe, Partner, C&M
Capitolink LLC, and Counsel, Crowell & Moring Environment & Natural
Resources Group with Attachments
ATTACHMENTS